LONDON: Gold fell slightly on Monday, retreating from a three-week high as tensions between Ukraine and Russia eased and investors turned to rising European shares and some withdrew from exchange-traded gold funds.
Late on Friday, Russia's Defence Ministry said it had ended military exercises in southern Russia, which the United States had criticised as a provocative step in the Ukraine crisis.
Spot gold was down 0.1 percent to $1,308.59 an ounce by 0947 GMT, after reaching a three-week high of $1,322.60 on Friday. U.S. gold futures for December delivery lost $1.40 to $1,309.50.
"I don't really see gold going above $1,350, because there is no real interest or incentive for funds or investors in ETFs to come back," Credit Suisse analyst Tom Kendall said.
"There is so much uncertainty about U.S. rates and monetary policy that there is no incentive for anyone to come back in a sizeable way to the gold market, particularly when the risk-off in equities we had (last week) wasn't particularly scary."
European stocks bounced back from a sharp two-week slide, tracking a rally on Wall Street. The dollar, which lost heavily against the yen last week after U.S. President Barack Obama authorised air strikes in Iraq, was up 0.1 percent against a basket of currencies, boosted by steadier U.S. Treasury bond yields.
A stronger U.S. currency makes dollar-denominated assets such as gold more expensive for other currency holders, while returns from U.S. bonds are closely watched by the gold market, given that the metal pays no interest.
Losses in the gold price were kept in check, however, by conflicts in other countries such as Iraq and Israel.
The United States conducted a third day of air strikes on Sunday in Iraq against the Islamic State insurgent group. Israel and the Palestinians held their fire early on Monday at the start of a new 72-hour ceasefire proposed by Egypt.
Although sentiment last week favoured gold and other assets perceived as less risky, speculators cut their bullish bets on futures and options in the week to Aug. 5, according to Friday data from the Commodity Futures Trading Commission.
Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 1.79 tonnes to 795.86 tonnes on Friday.
Physical buying in top consumers China and India has also been sluggish, while strong U.S. economic data has stoked fears of a tightening in monetary policy.
"The potential for geopolitical tensions to ease may leave gold vulnerable to the downside as the price premium built since mid-June may fade," HSBC said in a note.
Bullion investors will continue to monitor U.S. data releases as the strength of the world's largest economy dictates the pace at which the Federal Reserve tightens monetary policy.
Silver was down 0.2 percent to $19.87 an ounce. Platinum fell 0.4 percent to $1,466.99 an ounce, while palladium gained 0.2 percent at $860 an ounce.
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