London (Reuters): Gold prices rebounded from seven-week lows after North Korea fired a missile into Japanese waters, raising geopolitical tensions and boosting bullion's safe-haven appeal.
North Korea said it successfully test-launched an intercontinental ballistic missile, days before leaders from the Group of 20 nations are due to discuss steps to rein in Pyongyang's weapons programmes.
Gold is typically seen as a store of value and therefore a safe haven investment in times of economic and political uncertainty when investors tend to sell riskier assets such as stocks.
World shares, oil and bond yields all pulled back on Tuesday as North Korea's long-range missile test and July 4 holidays for US markets curbed investor appetite for risk.
Spot gold was up 0.4 percent at $1,225.08 an ounce by 1146 GMT, while US gold futures climbed 0.5 percent to $1,224.60 an ounce.
"The market is turning to gold over the conflict in North Korea," Danske Bank senior analyst Jens Pedersen said. "But the market isn't pricing in a further deterioration in relations because this conflict has been going on for a while."
Gold fell 1.7 percent on Monday, the most in one day since November and its lowest since May.
Hedge funds and other money managers reduced their net long positions in COMEX gold and silver for a third straight week in the week to June 27, US Commodity Futures Trading Commission data showed.
"The prevailing threat of geopolitical tensions is likely to cause a knee jerk reaction to safe haven assets with bullion up over 8 percent for the year," Sucden Financial said in its quarterly report.
"Accordingly we anticipate impulsive demand for bullion to persist."
Silver slipped 0.1 percent to $16.10 an ounce, after touching its lowest since May 9 at $16.01.
"More investors are coming aboard at the current relatively low entry level for silver and physical demand has been robust both in Singapore and in Hong Kong," said Joshua Rotbart, managing partner, J. Rotbart & Co in Hong Kong.
Platinum rose 1 percent to $911 an ounce, having fallen on Monday to below $900 for the first time since May 10.
Palladium advanced 1.6 percent to $857.10 an ounce. The metal, mainly used to reduce carbon emissions in diesel cars, is the best performing precious metal so far this year.
US markets will be closed on Tuesday for the Independence Day holiday.
