GLOBAL MARKETS-Stocks edge lower as markets remain cautious, with gold prices at new highs

* Wall Street stocks edge lower * European shares finish down * Gold prices reach fresh new highs * Brent crude up nearly 2% * Dollar index gains (Updates prices throughout, adds background on currencies and bonds) By Chibuike Oguh NEW YORK, Oct 21 (Reuters) - Global equity markets traded lower on Monday as investors hedged their positions amid rising geopolitical tensions and uncertainty over the U.S. presidential election, even as gold prices reach new highs. The Israeli military is continuing its attacks against Lebanon's Hezbollah militant group, with hundreds of Beirut residents fleeing their homes late on Sunday as explosions rocked the Lebanese capital. Gold prices surged to a record high on Monday and were up 0.07% to $2,722.23 an ounce XAU= . All three main Wall Street indexes were trading lower, with defensive stocks, including real estate and healthcare stocks, among the leading drags on the benchmark S&P 500 index .SPX . The Dow Jones Industrial Average .DJI fell 0.74% to 42,956.04, the S&P 500 .SPX fell 0.18% to 5,841.10 and the Nasdaq Composite .IXIC fell 0.16% to 18,459.62 The European shares .STOXX index lost 0.66%, while MSCI's gauge of stocks across the globe .MIWD00000PUS fell 0.55%. Overnight in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 0.7% lower. "Between the combination of escalating or still-high Middle East tensions, and we're only a handful of days away from the (Nov. 5 U.S. election), it could be that the market is getting nervous ahead of that and people are squaring some of their positions," said Wasif Latif, president and chief investment officer at Sarmaya Partners. Oil prices gained following a more than 7% drop last week. Brent crude futures LCOc1 were last up 1.57% at $74.21 a barrel, while U.S. West Texas Intermediate crude futures CLc1 rose 2% to $70.65. Markets are pricing in a 86.7% chance for a cut of 25 basis points (bps) at the Fed's November meeting, with an 13.3% chance of the central bank holding rates steady, according to CME's FedWatch Tool. The yield on benchmark U.S. 10-year notes US10YT=RR rose 10.3 basis points to 4.178%. The dollar climbed, buoyed by a rise in U.S. bond yields. The euro EUR=EBS was down 0.43% at $1.0818, while the pound GBP=EBS weakened 0.51% to $1.2982. Against the Japanese yen JPY=EBS , the dollar strengthened 0.66% to 150.5. The European Central Bank (ECB) last week cut rates for the third time this year. Data on Monday showed German producer prices fell more than expected in September. The dollar index =USD , which tracks its performance against a basket of currencies including the yen and the euro, rose 0.45% to 103.92. (Reporting by Chibuike Oguh in New York; editing by Jonathan Oatis and Tomasz Janowski) ((mailto:[email protected]; +332-219-1834; Reuters Messaging: rm://[email protected]/))