Gold builds on Middle-east conflict fuelled gains as US dollar, bonds retreat

Gold prices hit a more than one-week high on Tuesday, a day after posting sharp gains on increased market uncertainty due to the Middle East conflict as dovish remarks from top U.S. Federal Reserve officials weighed on the dollar and bond yields.

FUNDAMENTALS
* Spot gold rose 0.2% to $1,864.39 per ounce by 0117 GMT, earlier hitting its highest since Sept. 29. U.S. gold futures climbed 0.8% to $1,878.20.


* Gold prices closed about 1.6% higher on Monday, its biggest one-day jump in five months, as military clashes between Israel and Palestinian Islamist group Hamas raised fears that a wider conflict could affect oil supply from the Middle East and boosted demand for safe-haven assets such as gold.

* The conflict is threatening more volatility for investors, adding to uncertainty ahead of corporate earnings season and crucial U.S. inflation data later in the week.

* Benchmark 10-year Treasuries made their sharpest rally in more than a month at the open in Tokyo.

* U.S. dollar index retreated as top Fed officials indicated on Monday that rising yields on long-term U.S. Treasury bonds could steer the Fed from further increases in its short-term policy rate.

* The remarks by Fed Vice Chair Philip Jefferson and Dallas Fed president Lorie Logan caused investors to undercut the likelihood of further Fed rate increases.

* Gold is traditionally seen as a safe-haven investment during times of economic uncertainty, but as it yields no interest, it tends to lose its attraction when interest rates rise.

* SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.5% to 861.81 metric tons on Monday.

* Among other metals, spot silver gained 0.2% to $21.94 per ounce, platinum rose 0.4% to $889.53 and palladium climbed 1.3% to $1,154.34.