Gold rally pauses

Gold eased on Wednesday, taking a breather after rallying in the last session on an escalation in the Middle East conflict, while traders waited for more clues on US interest rates, reports Reuters.

Spot gold was down 0.5 per cent at $2,650.89 per ounce by 1146 GMT, following a jump of more than 1 per cent on Tuesday after Iran launched missile strikes on Israel.

U.S. gold futures eased 0.7 per cent to $2,672.00.

Reining in gold's run was strength in the rival safe-haven dollar.

"Gold is just seeing some short-term pressure due to a stronger dollar but the environment remains extremely favourable for gold," said Kinesis Money market analyst Carlo Alberto De Casa.

Gold was still within sight of recent highs on fears of further escalation in the Middle East, including retaliation by Israel.

Longer term, the outlook for real interest rates is going to drive gold, Daniel Hynes, senior ANZ commodities strategist said in a note.

Bullion's 28 per cent rally so far this year has been driven in part by the Fed's monetary easing, which enhances the relative appeal for zero-yield gold.

Traders see a 38 per cent chance of a 50 bps cut from the Fed in November.