Safe-haven demand sets gold for third weekly gain on Mideast tensions

Gold prices were set to mark their third straight weekly rise on Friday as a risk averse mood due to the ongoing Middle East conflict pushed investors to the safety of bullion, while investors also awaited key US consumption figures.

Spot gold was steady at $1,985.30 per ounce by 0950 GMT. US gold futures fell 0.1 per cent to $1,996.20.

With US Treasury yields near 16-year highs and the dollar still performing well, gold has risen "so there's no doubting that it is acting as a safe haven," said Craig Erlam, senior markets analyst at OANDA.

Israeli forces carried out their biggest ground attack in Gaza in their war with Hamas on Thursday, while Egyptian Red Sea towns were hit by two missiles on Friday, injuring several people, showing the risk of regional spillover from the Israel-Hamas conflict.

"Gold prices will be a function of the Israel-Hamas conflict for as long as things are at risk of escalating," said Kyle Rodda, financial market analyst at Capital.com.

Spot gold has gained nearly 8.5 per cent or more than $150, since the start of the war on Oct. 7 on concern over an escalation in the conflict.

But the lingering prospects of US interest rates staying higher for longer have kept prices below the $2,000 key psychological level last breached in May this year.

Analysts at Commerzbank estimate the gold price will reach the $2,000 mark in the near future, in view "of the tense situation in the Middle East".

Investor focus is also on the US personal consumption expenditure (PCE) price index due later in the day for cues on what to expect from the US Federal Reserve's policy meeting next week.

"With this higher for longer narrative that the Fed has stuck with, we need to see more progress on the inflation figures (such as PCE)," said Erlam.

In other metals, spot silver rose 0.1 per cent to $22.85 per ounce, platinum climbed 0.5 per cent to $904.33 and palladium gained 0.1 per cent to $1,134.67.