Image Credit: Virendra Saklani/Gulf News

Gold steadied after earlier gains on reports from US officials that Israel had struck targets in Iran following last weekend's unprecedented missile attacks by Tehran.

Spot bullion initially rose as much as 1.6 per cent as concerns over a wider regional conflict in the Middle East roiled global markets, while base metals also jumped before paring their winning streak. Media from both countries appeared to downplay the impact and severity of the strikes.

Bullion has smashed records in a powerful rally since mid-February, driven by the prospect of US interest rate cuts, continued purchasing by central banks and strong consumer demand, especially in China. Simmering international tensions have also boosted the precious metal, which broke through $2,400 a ton earlier in the day.

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Traders have been girding for an Israeli response to Iran's unprecedented missile and drone attack last weekend, with the rhetoric between the two escalating as Tehran warned against striking its nuclear facilities.

An explosion was heard Friday in Iran's central city of Isfahan, the country's semi-official Fars news agency reported, as concerns mounted about Israeli retaliation.

Flights were suspended in Isfahan and the Iranian cities of Tehran and Shiraz as well as airports across the country's western borders, Iran's Mehr news agency also reported.

Separately, US data on Thursday had fanned concerns that the Federal Reserve has some way to go before cutting rates "- a view shared by a number of policymakers. Higher borrowing costs are typically negative for the precious metal, which doesn't pay interest.

Spot gold rose 0.3 per cent at $2,384.98 an ounce at 9:59 a.m. in London. The Bloomberg Dollar Spot Index rose 0.1%. Silver and platinum were little changed, palladium fell.