NEW YORK: Gold eased on Wednesday, taking a breather after rallying in the last session on an escalation in the Middle East conflict, while traders waited for more clues on US interest rates.

Spot gold was down 0.5% at $2,650.89 per ounce by 1146 GMT, following a jump of more than 1% on Tuesday after Iran launched missile strikes on Israel. US gold futures eased 0.7% to $2,672.00.

Reining in gold’s run was strength in the rival safe-haven dollar. “Gold is just seeing some short-term pressure due to a stronger dollar but the environment remains extremely favourable for gold,” said Kinesis Money market analyst Carlo Alberto De Casa.

Gold was still within sight of recent highs on fears of further escalation in the Middle East, including retaliation by Israel. Longer term, the outlook for real interest rates is going to drive gold, Daniel Hynes, senior ANZ commodities strategist said in a note. Bullion’s 28% rally so far this year has been driven in part by the Fed’s monetary easing, which enhances the relative appeal for zero-yield gold.

Traders see a 38% chance of a 50 bps cut from the Fed in November. They will keep a close eye on data, including US ADP employment figures later in the day and Friday’s nonfarm payrolls, while also scanning commentary from Fed officials on Wednesday.