NEW YORK: Gold prices jumped 1% on Tuesday as safe-haven demand spurred by an escalation in the Middle East conflict, along with lower US bond yields pushed back prices near last week’s record highs. Spot gold was up 1.1% at $2,664.20 per ounce, as of 9:48 a.m. ET (1348 GMT), after hitting an all-time high of $2,685.42 last Thursday. US gold futures edged 0.5% higher to $2,673.

Gold is rising because of the possibility of what can happen if things spiral out of control with Lebanon and Israel with boots on the ground, and Iran becomes more involved in the Middle East, said Daniel Pavilonis, senior market strategist at RJO Futures.

Gold is viewed as a safe asset during economic and political turmoil and also gains in a low-rate environment as it offers no interest of its own. Benchmark US 10-year bond yield slipped, making non-yielding bullion more attractive.

“At the same time, we’re looking at cutting rates at a time when inflation has slowed, but we’re still in an inflationary environment... this is the appropriate time to be long gold” Pavilonis added. The market will now be closely watching US labour data this week as well as remarks from various Fed officials, for more hints on the Fed’s policy stance.

Bullion on Monday posted its worst day in over four weeks after Fed Chair Jerome Powell suggested the central bank will likely pursue quarter-percentage-point rate cuts moving forward.

However, the causes of the recent rally, including expectations of lower US interest rates and safe-haven demand driven by geopolitical instability, remain intact, said Ricardo Evangelista, senior analyst at ActivTrades.