Gold prices gained on Friday as fears of escalating conflict in the Middle East lifted the appeal of the safe-haven metal, despite stronger than expected US inflation data boosting the dollar and Treasury yields.

Spot gold was up 0.5% at $2,038.19 per ounce at 0951 GMT, extending its run above the $2,000 level to nearly a month. US gold futures were up 1.2% to $2,042.90.

“Gold is rising on the back of the ongoing geopolitical conflict in the Middle East … In spite of the stronger-than-expected CPI print, gold prices have recovered today and have moved up and are likely to move up further,” said Kunal Shah, head of research at Nirmal Bang Commodities in Mumbai.

A sudden widening of the war in Gaza is raising questions about how long stock markets can rally, and when central banks will cut rates.

The United States and Britain launched strikes against sites linked to the Houthi movement in Yemen, while Saudi Arabia called for restraint in light of the strikes.

Markets now await US producer prices data, due at 1330 GMT, after data on Thursday showed US consumer prices rose more than expected in December. Excluding volatile food and energy costs, however, the pace of price increases fell to 3.9% from 4% on an annual basis.

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Fed officials signalled inadequate progress on inflation to start cutting rates in March. But traders still see a 71.4% probability of a March cut, according to the CME Fedwatch tool.

Higher rates dim the appeal of non-yielding bullion.

“Market participants continue to expect a soft landing of the US economy, allowing the Fed to cut rates over coming months. This should support the price of the yellow metal,” said UBS analyst Giovanni Staunovo.

Spot silver rose 0.7% to $22.91 per ounce, platinum gained 0.6% to $920.42, and palladium climbed 0.2% to $990.25.