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Gold rally cools as traders eye MidEast developments, US data

Gold bars are pictured in a display area at the plant of Argor-Heraeus in Mendrisio

By Ashitha Shivaprasad

(Reuters) - Safe-haven gold eased on Monday, hitting pause after jumping to within striking distance of the key $2,000 level in the last session, as traders positioned for further developments on the Middle East conflict and U.S. economic data.

Spot gold fell 0.3% to $1,976.19 per ounce by 1:41 p.m. ET (1741 GMT). U.S. gold futures settled 0.3% lower at $1,987.80.

"Safe-haven demand will continue to drive gold higher after a slight period of consolidation. We believe geopolitical tensions and the uncertainty in the Middle East will continue to drive prices higher," said David Meger, director of metals trading at High Ridge Futures.

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Bullion has surged about 9% in the past two weeks as investors sought to hedge against risks of a wider escalation in the Israel-Hamas war.

However, "while not a negative signal, it is a red flag and that momentum (in gold) that previously existed has not been restored in early trade this week which could lead to some profit-taking," said Craig Erlam, senior markets analyst at OANDA in a note.

Focus is also on the U.S. PCE price index on Friday— the Federal Reserve's favoured inflation gauge — and U.S. GDP figures for the third quarter on Thursday.

"If inflation data come in higher than expected, it will raise concerns about rising interest rates, to which gold might see a knee-jerk reaction to the downside, but safe-haven demand should begin to kick in post that," Meger added.

Silver slipped 1.3% to $23.05 per ounce, platinum rose 0.3% to $897.58 and palladium gained 3% to $1,131.03.

"Sluggish BEV (battery-powered electric vehicle) sales growth and an increase in palladium-containing light vehicles this year is expected to contribute to a slight improvement in Chinese palladium autocatalyst demand this year," Heraeus analysts wrote in a note.

(Reporting by Ashitha Shivaprasad and additional reporting by Sherin Elizabeth Varghese in Bengaluru ; Editing by Andrea Ricci, Aurora Ellis and Shailesh Kuber)