Gold extends its retreat on Tuesday

Gold extended its retreat on Tuesday, moving further away from a five-month high hit last week, hurt by a stronger dollar and elevated Treasury yields, while traders kept one eye on U.S. economic data and another on tensions in the Middle East.

Spot gold lost 0.5% at $1,962.99 per ounce by 9:38 a.m. ET (1338 GMT). U.S. gold futures fell 0.7% to $1,974.30.

The dollar index rose 0.4% against its rivals, making gold more expensive for other currency holders, the benchmark 10-year U.S. Treasury yield also rose.

“Stronger dollar and uptick in yields is negative for gold today, but the geopolitical risk will put a floor under prices. $2,000 is still in cards for the near-term or even a new record high if there is an escalation in the Middle East crisis,” said Jim Wyckoff, senior analyst at Kitco Metals.

Gold prices have climbed about 9% in the past two weeks, hitting a five-month high of $1,997.09 on Oct. 20, a rally mainly fuelled by safe-haven inflows on concern Israel’s war with Islamist group Hamas will spread.

But, gold’s inability to rally is a signal that “safe haven demand has started to wane, as markets learn to live with tensions in the Middle East,” Marios Hadjikyriacos, senior investment analyst at forex broker XM, said in a note.

Market focus is on the U.S. third-quarter GDP figures due on Thursday and the U.S. PCE price index on Friday that could influence the Federal Reserve’s outlook on interest rates.

Traders are widely expecting the Fed to keep interest rates on hold in November, according to the CME FedWatch tool.

“If we see data that shows strength in the U.S. economy and there is no flare up in the MidEast situation, it will be bearish for gold as it would put pressure on Fed to raise rates,” added Wyckoff.

Spot silver slipped 0.6% to $22.85 an ounce, platinum dipped 1.7% to $881.51, while palladium eased 0.7% to $1,110.00.