Gold prices slip on dollar rebound

LONDON, July 10 (Reuters): Gold headed lower on Tuesday, weighed down by a stronger dollar, and may re-test a seven-month low after a failed attempt to break higher in the previous session.

Spot gold was down 0.3 per cent at $1,253.60 an ounce by 1030 GMT, after retreating from its highest since June 26 at $1,265.87 in the previous session.

US gold futures for August delivery were 0.4 per cent lower at $1,254 an ounce.

"If this dollar strength continues, we could see another test of $1,240, the lows from last week and mid-December, a crucial technical level," said Carsten Fritsch, commodity analyst at Commerzbank in Frankfurt.

Bullion has been in a downtrend since touching $1,365.23 on April 11, the strongest in nearly three months.

The dollar's index against a basket of six major currencies was up 0.2 per cent at 94.263 after dropping to its lowest since mid-June on Monday.

A stronger dollar makes greenback-denominated gold more expensive for holders of other currencies.

Investors were also on the sidelines awaiting developments on the trade war between China and the United States, said Dick Poon, general manager, Heraeus Metals Hong Kong Ltd.

Last week, the world's top two economies slapped tit-for-tat duties on $34 billion worth of each other's imports.

"Geopolitical issues such as Britain's confused exit from the European Union and US President Trump's assertion that China was impeding North Korean progress on denuclearisation have provided some support for gold," said Sharma.

Trump suggested on Monday that China might be seeking to derail US efforts aimed at denuclearising North Korea.

Meanwhile, hedge funds and money managers raised their net long position in COMEX gold by 105 contracts to 4,291 contracts in the week to July 3, US Commodity Futures Trading Commission (CFTC) data showed on Monday.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, dropped 0.18 per cent to 800.77 tonnes on Monday, its lowest since August 2017.

"For gold to recover, we need to see the return of investors, not only speculative but ETF investors," Commerzbank's Fritsch said. "We may have to wait until the autumn until we see longer lasting increase in gold prices."