Oct 1 (Reuters) - Gold prices rose on Tuesday on safe-haven demand due to Middle East tensions and lower U.S. bond yields, although the metal hovered below recent record highs after the Federal Reserve chief signalled smaller rate cuts in the future.
Spot gold was up 0.6% at $2,649.59 per ounce, as of 1057 GMT, after hitting an all-time high of $2,685.42 last Thursday. U.S. gold futures edged 0.4% higher to $2,671.
The benchmark U.S. 10-year bond yield slipped on Tuesday, making non-yielding bullion more attractive for investors.
Gold dropped from historical highs due to profit-taking and some upside capped by Chinese stimulus measures directing investor flows to China's stock market, said Ricardo Evangelista, senior analyst at ActivTrades.
However, the causes of the recent rally, including expectations of lower U.S. interest rates and safe-haven demand driven by geopolitical instability, remain intact, Evangelista added.
Israel said intense fighting erupted with Hezbollah in south Lebanon on Tuesday.
Bullion on Monday posted its worst day in over four weeks after Fed Chair Jerome Powell suggested the central bank will likely pursue quarter-percentage-point rate cuts moving forward.
Lower interest rates reduce the opportunity cost of holding bullion.
Market focus is now on U.S. ADP employment data, due on Wednesday, and the non-farm payrolls on Friday, which will provide more clarity on the health of the U.S. labour market.
Speeches from various Fed officials along with U.S. job openings data are also expected later in the day.
"A higher-than-expected U.S. unemployment rate that forces the Fed into a more aggressive easing stance could restore gold back to its all-time high," said Han Tan, chief market analyst at Exinity Group.
"We should see $2,700 for gold over the near term as long as expectations for Fed rate cuts remain intact."
Goldman Sachs raised its gold price forecast to $2,900 per ounce from $2,700 per ounce for early 2025, citing gradually rising ETF flows with interest rate cuts in the West and China, and higher central bank purchases.
Elsewhere, spot silver was up 0.7% at $31.37 per ounce, platinum gained 0.4% to $979.83, while palladium shed 0.8% to $991.36.
Reporting by Anushree Mukherjee in Bengaluru, additional reporting by Swati Verma; Editing by Sonia Cheema and Mrigank Dhaniwala
