Gold slips as rate fears beat geopolitical tensions

The price of gold retreated Friday, a day after its biggest advance in a month, as speculation over the timing of a U.S. interest rate hike eclipsed concerns about rising geopolitical tensions.

Gold futures for August delivery changed hands at $1,310.40 an ounce in afternoon trading on the Comex in New York, down $6.50, or 0.49%, from Thursday's close of $1,316.90.

Investors worry that the Federal Reserve may raise interest rates sooner than anticipated if jobs and wages improve unexpectedly fast.

Higher interest rates dampen demand for gold, seen as a safe haven during times of political and economic turmoil. When rates rise, investors tend to move from the precious metal, which pays no interest, to assets that do.

Panic buying

On Thursday, following the downing of a Malaysian passenger jet in eastern Ukraine, gold posted its largest daily gain since June 19.

"Yesterday's Malaysia Air incident was enough to get the market spooked," Thomas Capalbo, a broker with Newedge, told the Wall Street Journal. "People knew there was chaos and unrest in that area, and the fact that it escalated to that level triggered some panic buying."

An Israeli ground offensive in Gaza that began Thursday night appeared to provide gold with additional support.

Set to drop

But a stronger U.S. dollar and a shift of funds from falling bullion to rising stocks continues to put downward pressure on the yellow metal, which touched a nearly four-week low on Tuesday.

"We may still see gold remaining above $1,300 today but the strong selling seen at the start of the week indicates there is some pressure from market participants to liquidate the metal and push prices lower," Peter Fertig of Quantitative Commodity Research was quoted by Reuters as saying.