Gold rose to a two-month peak on Monday as a weaker dollar fuelled investor interest in the metal, with US military strikes in the Middle East also providing some limited support in holiday-thinned trading. Spot gold was up 0.1% at $1,512.33 per ounce by 1238 GMT after hitting its highest since Oct. 25 at $1,515.80. US gold futures were down 0.2% at $1,515.10 per ounce.
Given the lack of trading volume during the holiday season, even "a sensitive event" like the US air strikes is not having enough of an impact to keep gold prices climbing, Bank of China International analyst Xiao Fu said.
"(The) little upside movement that we are seeing today is mostly due to a weaker dollar," she said. The dollar slipped against six major currencies after recording its biggest single day percentage drop since March in the previous session.
A weaker dollar makes gold cheaper for investors holding other currencies. The US military on Sunday carried out air strikes in Iraq and Syria against an Iran-backed militia group, providing modest support to the precious metal used as a safe investment in times of geopolitical and economic uncertainty.
Investor interest in gold has surged this year due to a raft of geopolitical uncertainties, including protests in Hong Kong and tensions on the Korean peninsular, as well as a long-drawn Sino-US tariff war impacting global economic growth.
The metal has climbed nearly 18% so far and is on track for its biggest annual rise since 2010. However, development on the trade-war front and a slow but steady uptick in the global economy might dampen the rally in gold going forward, analysts said.
"Gold as a non-interest yielding asset will face considerable headwinds as markets contemplate fading downside risks and softer geopolitical overtones," Benjamin Lu, analyst at Phillip Futures said in a note. "Gold prices will likely ease bullish gains amid heightened market optimism for Q1 2020." On the trade front, China's Commerce Ministry on Sunday said it has "proactively dealt with" trade frictions with the United States this year.
Market participants however remain wary even as Washington and Beijing move close to ratifying a trade deal. Indicative of investor sentiment, holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.1% to 893.25 tonnes on Friday, their highest since Nov. 29.
Among other precious metals, silver rose 0.6% to $17.87 per ounce, while platinum climbed 0.6% to $950. Palladium edged up 0.1% to $1,906.16 per ounce.