Gold bars on display. Picture: BLOOMBERG
Gold bars on display. Picture: BLOOMBERG
Gold bars on display. Picture: BLOOMBERG
Gold bars on display. Picture: BLOOMBERG

Bengaluru — 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 US and Iran.

Palladium, meanwhile, hit another record peak due to prolonged supply constraints in the market. Spot gold was steady at $1,566.56/oz as of 10.47am GMT, having fallen as much as 0.7% earlier in the session. US gold futures were also steady at $1,568.30/oz.

“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, adding that the market seemed a bit more relaxed about the Middle East issue. Gold, considered a safe haven in times of political and economic uncertainties, touched its highest since April 2013 at $1,582.59/oz on Monday.

Prices surged on worries about an armed conflict between the US 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 on Tuesday said that Iran had been considering 13 “revenge scenarios” in retaliation to the air strike.

The US also denied a visa to Iranian foreign minister Mohammad Javad Zarif, which would have let him attend a UN Security Council meeting in New York 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,” Boele said.

Other safe-haven investments, such as the yen and Swiss franc, also pulled back after posting some solid gains in the previous two sessions. The dollar index gained, making bullion expensive for holders of other currencies.

“For prices to rally further, it would likely require some combination of general US dollar weakness, lower interest rates and a spike in inflation expectations — via higher oil prices and/or concerns of a negative spill-over to global growth,” Macquarie analysts wrote in a note.

Elsewhere, spot palladium rose 0.2% to $2,035.38/oz, having touched a record peak of $2,040.77/oz earlier in the session. Silver slipped 0.1% to $18.12/oz, after touching a more than three-month high of $18.50/oz in the previous session, while platinum advanced 0.5% to $967.62/oz.