Gold steadied following Tuesday’s surge, with markets weighing the potential next steps in an expanding Middle East conflict after Israel pledged to retaliate against Iran’s missile strikes.

Bullion traded around $2,660 an ounce after closing 1.1 per cent higher in the previous session, when Iran launched about 200 ballistic missiles at Israel.

President Benjamin Netanyahu called the move a “big mistake” and vowed to make Iran “pay for it.” The US is actively supporting preparations to defend Israel, according to an earlier report.

“Geopolitical headlines often trigger immediate market reactions, but these tend to reverse if no significant assets are impacted,” said Charu Chanana, a strategist at Saxo Capital Markets Pte, who added that gold remained an attractive hedge. “When considering how markets might react next, the key worry would be risks of an escalation, particularly if Iran’s oil assets could be targeted.”

Gold has rallied nearly 30 per cent this year, hitting a series of record highs in the process. Recent gains have been fueled by anticipation for interest rate easing by the Federal Reserve, which last month kicked off its cutting cycle with a 50-basis-point move.

Along with any further escalation of conflicts in the Middle East, traders will be looking to the latest US jobs report due Friday, which may prove to be pivotal in offering insights on the Fed’s pace of rate cuts. Swaps traders are wagering on a one-in-three chance the central bank will deliver another half-point reduction in November.

Spot gold was little changed at $2,660.15 an ounce as of 10:23 a.m. in Singapore, below its all-time high of $2,685.58 reached last week. The Bloomberg Dollar Spot Index edged 0.1 per cent lower. Silver dipped, while platinum and palladium edged higher.

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