BENGALURU - Gold prices edged down on Tuesday on a firmer dollar and a rise in U.S. Treasury yields and as investors' reaction to the dispute between the United States and Iran remained muted.
Spot gold was down 0.2 percent at $1,221.61 an ounce at 0359 GMT.
U.S. gold futures for August delivery were 0.3 percent lower at $1,221.90 an ounce.
The dollar index, which measures the greenback against a basket of six major currencies, held steady at 94.662. It hit a one-year high of 95.652 last week.
"In addition to the U.S. dollar, there has been little follow through on the Trump and Rouhani war of words and frankly the overall reaction on risk sentiment was muted," said Stephen Innes, APAC trading head, OANDA.
"I think the market realises the chance of this escalation leading to a U.S. military reprisal is overblown."
Iran on Monday dismissed an angry warning from U.S. President Donald Trump that Tehran risked dire consequences if it made threats against the United States.
Trump on Sunday warned Iranian President Hassan Rouhani not to threaten the United States again, after Rouhani cautioned Trump about pursuing hostile policies against Tehran.
Gold prices, which usually gain in times of political and financial instability, have failed to do so, analysts noted.
"The fall in both oil and gold prices overnight is a testament that investors are likely focused on oversupply risks rather than on geopolitical risks which are traditionally short-lived in nature," OCBC said in a commentary on Tuesday.
Benchmark 10-year U.S. Treasury yields rose to their highest in five weeks on Monday as the Federal Reserve was seen as likely to continue raising interest rates despite criticism from U.S. President Donald Trump.
Expectations that the U.S. Federal Reserve will raise interest rates put pressure on gold prices as the yellow metal does not yield interest.
"Technically, gold is struggling very hard to recover and as long as the dollar remains in charge gold is going to suffer," a Hong Kong-based trader said.
Also, gold has broken the 200-day moving average on a weekly basis, giving the metal a tinge of technical weakness, the trader added.
Spot gold looks neutral in a range of $1,214-$1,237 per ounce, Reuters technical analyst Wang Tao said. [TECH/C]
Meanwhile, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.55 percent to 802.55 tonnes on Monday.
In other precious metals, silver was down 0.2 percent at $15.34.
Platinum was 0.6 percent lower at $826.25 an ounce and palladium fell 0.7 percent at $908.85.