Gold prices edged down on Wednesday as a robust US dollar weighed on the market, but concerns about political turmoil in Italy and Sino-US trade conflict limited losses. Spot gold was 0.2-percent lower at $1,296 per ounce by 0736 GMT.
US gold futures for June delivery were down 0.3 percent at $1,295.40 per ounce. "The stronger dollar is the most significant headwind," said Stephen Innes, APAC trading head at OANDA.
"With the yellow metal's sensitivity to the US dollar on full display, it is unlikely gold will move significantly higher until we reach the EU 'Crisis Zone' which we are nowhere near at this stage." Investors fear that repeat elections in Italy - which could come as soon as July - may become a de-facto referendum on Italian membership of the currency bloc and the country's role in the European Union.
"People are really worried about what's happening in Europe and the US-China trade tensions ... we also see US bond yields drop," said Richard Xu, a fund manager at HuaAn Gold, China's biggest gold exchange-traded fund.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.35 percent to 851.45 tonnes on Tuesday.
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