Gold gives up Iraq boost, holds key $1,300 level

San Francisco (Aug 8)  Gold rejected a 3-1/2 week high on Friday, but was set for its biggest weekly gain in seven as the dollar and equities fell after U.S. President Barack Obama authorized air strikes in Iraq, adding to simmering international tensions.

Obama said in an address he had authorized targeted strikes to protect the besieged Yazidi minority and U.S. personnel in Iraq, after the Iraqi government requested help.

Spot gold hit its highest since July 14 at $1,322.60 an ounce earlier, but reversed as Wall Street indexes turned higher. It was modestly lower near $1,312 an ounce. The metal has gained 1.9 percent this week, its first increase in four weeks and the highest weekly gain in seven. U.S. gold futures for December delivery rose 0.1 percent to $1,314 an ounce.

The dollar was down 0.2 percent against a basket of currencies, under pressure from by a 14-month low in 10-year U.S. Treasury yields.

A weaker U.S. currency makes dollar-denominated assets such as gold cheaper for other currency holders, while returns on bond yields are closely watched by the gold market, given that the metal pays no interest.

Bullion was also lifted by lower equity markets on growing fears that conflicts in Ukraine and the Middle East could sap global growth.

The yield hit a 14-month low and the dollar slipped against the safe-haven yen, showing increasing risk-aversion in financial markets.

Source: CNBC