Gold slips from near seven-year high amid US-Iran tensions

Gold prices retreated on Tuesday from near seven-year highs reached in the previous session as investors took profits in the absence of new developments in the tense situation between the United States and Iran.

Deficit-hit palladium meanwhile hit another record peak on the back of prolonged supply constraints in the market. Spot gold was down 0.1% at $1,564.31 per ounce as of 1257 GMT, having fallen as much as 0.7% earlier in the session. It touched its highest since April 2013 at $1,582.59 on Monday. US gold futures were 0.2% lower at $1,566.00.

"There is nothing fundamental going on here, it is just a reaction to yesterday`s price movement. Investors are looking at the other side of the coin and taking some profits," ABN Amro analyst Georgette Boele said. The market seems a little more relaxed about the situation in the Middle East, she added.

Prices surged on worries about an armed conflict between the United States and Iran after a US-authorised drone strike killed a top Iranian military official on Friday. With both sides exchanging threats of retaliation, a senior Tehran official said on Tuesday Iran had been considering 13 "revenge scenarios" in retaliation to the air strike.

"We are far from out of the woods yet, and any signs of hopes for an easing in tensions would be premature,"Commerzbank analyst Carsten Fritsch said. Washington`s decision to deny a visa to Iranian Foreign Minister Mohammad Javad Zarif had added to concerns, he said. Zarif was expected to arrive in New York for a United Nations Security Council meeting on Thursday.

"The fact that gold hasn`t reacted to this news is a signal that the market has already positioned (itself). People are long (on gold), so I would expect some kind of correction unless you really see an escalation," ABN`s Boele said.

Other safe-haven investments, such as the Japanese yen and Swiss franc, also pulled back after posting some solid gains in the previous two sessions. Elsewhere spot palladium rose 0.6% to $2,042 an ounce, having touched an all-time peak of $2,047.24 earlier in the session.

The surge in palladium prices is predominantly due to speculative buying, and the "higher the prices go, the sharper the correction will be", Commerzbank`s Fritsch said.
Silver slipped 0.6 % to $18.03 an ounce, after touching a more than three-month high of $18.50 in the previous session, while platinum advanced 0.6% to $968.50.