LONDON (Reuters) - Gold was steady on Tuesday after hitting a five-month peak the previous session, bolstered by a softer dollar, North Korea tensions and nervousness ahead of the French presidential election.
The dollar index fell near a three-week low on disappointing U.S. housing starts data and nerves over trade talks between the United States and Japan, while Britain's pound soared after Prime Minister Theresa May called for a snap general election. [FRX/]
May's call added to a lengthening list of uncertainties for investors already on edge over geopolitical tensions that also include Syria, Afghanistan, Turkey and U.S. relations with Russia and China.
"Short-term risk is skewed to the downside but underlying support is there with the focus on political uncertainties. We see the yen continuing to strengthen, and a strong yen and strong gold have gone hand-in-hand since November," Saxo Bank's head of commodity strategy Ole Hansen said.
"Also expectations about the dollar are up for revision, the strong dollar story is fading. (U.S. President Donald) Trump is talking it down and we're seeing weakness creep into U.S. data, changing the perception of how much rates have to rise."
A weaker dollar makes dollar-priced gold cheaper for non-U.S. investors.
Spot gold dipped 0.1 percent to $1,284.25 per ounce by 1419 GMT, after climbing to $1,295.42 in the prior session, its highest since Nov. 9.
U.S. gold futures dipped 0.4 percent to $1,286.70.
U.S. Vice President Mike Pence reassured Japan of American commitment to reining in North Korea's nuclear and missile ambitions on Tuesday, after warning that U.S. strikes in Syria and Afghanistan showed the strength of its resolve.
In France, investors remained nervous ahead of the first round of the country's presidential election this Sunday, even though an opinion poll put centrist Emmanuel Macron first, just ahead of far-right, anti-euro candidate Marine Le Pen.
"Investors appear very reluctant to part with gold. The growth euphoria has faded as tax cuts and infrastructure spending in the U.S. take longer than expected. Also taking into consideration ... the French elections, we believe major selling is unlikely over the coming months," said Julius Baer in a note.
The bank raised its three- and 12-month targets to $ 1,200.
Still, gold was vulnerable to a near term technical correction. Reuters analyst Wang Tao said spot gold may break a support at $1,281 per ounce and fall to the next support at $1,265, following its failure to break a trendline falling from the July 11, 2016 high of $1,374.71.
Spot silver fell 1 percent to $18.20 per ounce, after hitting over a five-month high of $18.649 in the prior session.
Platinum rose 0.5 percent to $983.30 per ounce, while palladium fell 1.1 percent to $781.90, having hit its lowest since March 20 earlier at $775,97.
Additional reporting By Nallur Sethuraman in Bengaluru. Editing by Jane Merriman, David Evans and Pritha Sarkar