Gold prices fell on Tuesday as easing tensions between the United States and North Korea pushed investors to seek riskier assets such as equities. U.S. gold futures for December delivery shed 0.7 per cent to US$1,281.40 per ounce.

Last week's fear was prompted by US President Donald Trump's warning North Korea would face "fire and fury" if it threatened the United States and North Korea's announcement it was considering plans to fire missiles at the US island territory of Guam.

But analysts cautioned that with joint South Korean-US military exercises scheduled and North Korea celebrating "Liberation Day" Tuesday, market volatility could return. "With the report North Korea has put its plans on hold, there is a sense of stepping back from the brink", Rabobank analyst Lyn Graham-Taylor said.

The dollar gained against its rivals, with the dollar index rising from 92.96 at the end of the Asian session to 93.18 during afternoon European trading hours. Both were below the Nikkei 225's close of 19,729.74 last Thursday - Japan markets had been closed Friday for a public holiday.

Japan's Nikkei stock index .N225 rose 1.2 percent, with a tailwind from a weaker yen.

USA stocks futures were higher, indicating Wall Street would open higher later in the day.

The gains in morning trade came in every sector, led by financial and technology stocks.

"We are not out of the woods yet and the situation in North Korea will remain front and centre", said Chris Weston, chief market strategist at IG Markets.

"There remains a risk of a renewed war of words, if not worse, but this outbreak of calm may be something to build on in terms of dialogue", he added.

Against the Swiss franc the dollar edged higher, after jumping more than 1 percent on Monday.

USA crude rose 0.41 per cent to US$48.79 per barrel and Brent was last at US$52.01, up 0.21 per cent. Also weighing on the yellow metal was the prospect of another increase in US interest rates this year, with one influential Federal Reserve member backing the move.

"Last night it seems traders grasped the news of Chinese refinery runs hitting a 10-month low and sold hard", McKenna noted. Silver added 5 cents to $17.12 an ounce.

Wall Street closed higher on Monday: The Dow Jones Industrial Average gained 0.62 per cent to close at 21,994, the S&P 500 added 1.00 per cent to close at 2,466 and the NASDAQ rose 1.34 per cent to close at 6,340.

Gross domestic product expanded an annualised 4.0 percent in April-June, more than the median estimate for 2.5 percent annualised growth and the biggest increase since January-March 2015.

Gold was out of favour yesterday after clocking a 2.46 per cent jump last week.