© Reuters. FILE PHOTO: An employee places ingots of 99.99 percent pure gold in a workroom at the Novosibirsk precious metals refining and manufacturing plant in the Siberian city of Novosibirsk, Russia, September 15, 2023. REUTERS/Alexander Manzyuk/File Photo

By Harshit Verma

(Reuters) – Gold prices edged down on Tuesday after clocking a sharp rise in the last session as risk sentiment improved and bond yields rebounded, while investors awaited the U.S. inflation data due later this week.

climbed to $1,865.19 per ounce, its highest since Sept. 29, earlier in the day and was last down 0.3% at $1,855.10 by 1217 GMT.

U.S. climbed 0.2% to $1,868.70.

Gold rose about 1.6% on Monday, its biggest one-day jump in five months, as military clashes between Israel and Palestinian Islamist group Hamas boosted demand for safe-haven investments.

“Markets remain responsive to further signs of escalation and further events that unfold over the coming days. But for now, it seems that markets have settled down,” said Craig Erlam, senior markets analyst at OANDA.

Gold has run into resistance at $1,865, with some initial profit taking on the back of two very positive days backed by risk aversion and the U.S. Federal Reserve’s balanced commentary, Erlam added.

European stocks rebounded sharply on Tuesday as dovish comments from Fed policymakers and easing oil prices helped calm investor nerves. ()

The military conflict in the Middle East is threatening more volatility for investors, adding to uncertainty ahead of the corporate earnings season and crucial U.S. Consumer Price Index data on Thursday, which could offer more visibility on the Fed’s rate-hike path.

Fed Vice Chair Philip Jefferson and Dallas Fed President Lorie Logan said on Monday that the recent run-up in yields may reduce the need for further interest rate hikes.

Benchmark 10-year Treasury yields rose to 4.7049%, decreasing the appeal for non-yielding bullion.

In the longer run, however, U.S. rates will be the bigger driver, said Kyle Rodda, financial market analyst at Capital.com, adding that yields are broadly very positive “and that’s kryptonite for gold”.

Spot silver fell 0.8% to $21.72 per ounce, platinum slipped 0.3% to $883.97 and palladium dropped 0.8% to $1,130.52.