Gold nosed at last week's record highs on Monday, buoyed by a dip in the dollar in Asian trading and worries about the global economy, although a lack of consumer demand could push prices lower in the near term.
Adding to the supportive backdrop for gold were U.S. comments that Iran has fissile material for two atomic bombs, but the prospect of a sharp contraction in demand from India, the world's largest gold consumer, and no fresh impetus might mean prices could ease before resuming their recent uptrend.
I think it needs to correct, said Simon Weeks, head of precious metals at the Bank of Nova Scotia. The weaker dollar and weaker sentiment is probably more positive than negative. But markets are already pretty long and quite frankly, there is no huge amount of fresh demand around, so on that basis, I'm slightly surprised that we are as high as we are, he said.
Weeks said he saw gold prices moving back through $1,230 toward $1,200 an ounce, from current levels, having hit a record of $1,264.90 last Monday.
Spot gold rose $2.45 to $1,255.80 an ounce by 1000 GMT, while U.S. gold futures for August delivery rose 70 cents to at $1,256.90 an ounce.
The dollar was holding roughly steady against a basket of six major currencies .DXY, but is still hovering around its lowest in six weeks as concern about the pace of U.S. recovery persisted and after data showed speculators cut back their bets on the greenback last week.
Coming up at 8:30 a.m. ET is U.S. core inflation data for May. The so-called core PCE index is the Federal Reserve's favored measure of price pressures.
The head of the Bombay Bullion Association said on Monday that gold imports into top consumer India likely fell by 75 percent in June from 29.9 metric tons a year ago. Suresh Hundia, president of BBA told Reuters this bearish estimate could be overly optimistic and the final figures could be lower than this.
The numbers are so bad, nobody wants to share it this time, he said referring to the importing banks and trading agencies which contribute their data to the trade body.
STILL A SAFE HAVEN
But ongoing doubt about the resilience of the global economic recovery and comments from the head of the CIA that Iran may have enough fissile material to make two atomic weapons, maintained support for gold.
The underlying safe haven concerns that have supported prices -- the economic environment, Europe's fiscal outlook and the longer term prospects for inflation, remain, said David Moore, commodities strategist at Commonwealth Bank of Australia.
The G20 hasn't had a significant impact on markets, and while concerns about Iran's nuclear capacity are nothing new, there seems to be additional clarity.
With this in mind, gold could rise further to surpass the June 21 record at $1,264.90 per ounce to touch $1,270, as bullish momentum is strong, according to Reuters technical analyst Wang Tao.
He noted the bulls were taking control with prices in an ascending channel from a $1,224.30 low struck last Wednesday and sharp rises and mild falls.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust (GLD.P) said its holdings remained unchanged at an all-time high at 1,316.177 metric tons.
U.S. lawmakers hammered out a historic overhaul of financial regulations, handing President Barack Obama a major domestic policy victory.
The U.S. regulations are pretty worrying. That's something that we will need to look at more closely, a commodities trading source in Singapore said.
So far, people are taking a wait-and-see attitude and it's hard to assess the impact on prices.
Dozens of House Democrats had threatened to vote against a ban on swaps trading on grounds the trade would move overseas.
Instead a compromise solution allows banks to stay involved in foreign-exchange and interest-rate swaps dealing, which form the bulk of the $615 trillion over-the-counter derivatives market.
Elsewhere, silver was up at $19.11 an ounce, from $19.04 late in New York on Friday, while in the platinum group metals complex, platinum rose 1 percent to $1,582.05 and palladium was up about 0.7 percent at $477.65.
(Additional reporting by Nick Trevethan in Singapore)
(Editing by Keiron Henderson)