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Gold firms despite stronger dollar as geopolitical concerns mount

Production of gold at Novosibirsk precious metals plant

By Ashitha Shivaprasad

(Reuters) - Gold prices climbed on Monday due to safe-haven demand spurred by Middle East tensions, even as the dollar and Treasury yields gained following a higher-than-expected uptick in U.S. retail sales in March, feeding apprehensions that the Federal Reserve could delay cutting interest rates this year.

Spot gold rose 0.9% to $2,365.09 per ounce as of 2:00 p.m. ET (1800 GMT), after hitting a record high of $2,431.29 on Friday in anticipation of Iran's retaliatory attack against Israel.

U.S. gold futures settled 0.4% higher at $2,383.

This very much seems like a geopolitically driven price move, which might be related to statements from the Israeli defense forces that something is going to materialize here, said Bart Melek, head of commodity strategies at TD Securities.

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Iran launched explosive drones and missiles late on Saturday in the first attack on Israel by another country in over three decades, stoking fears of a broader regional conflict.

The dollar rose 0.2% and 10-year Treasury yields hit a five-month high after data showed U.S. retail sales increased more than expected in March, further evidence that the economy had ended the first quarter on solid ground. [US/] [USD/]

The market now sees fewer than two 25-basis-point cuts by the year-end, after previously expecting three.

However, "in the near-term, gold prices could fall towards $2,200 as the geopolitical premiums get washed out," said Daniel Pavilonis, senior market strategist at RJO Futures.Central bank buying has also lent support to bullion.

"It is unlikely that there will be a wholesale reversal to net selling in the near term despite the record gold price, as central bank buying tends to be strategic and insensitive to the price," analysts at Heraeus said in a note.

Meanwhile, spot silver rose 3% to $28.72 after hitting a nearly three-year high in the previous session.

"Both industrial demand – mainly from solar PV manufacturing – and institutional investing appear to be supporting" silver, Heraeus analysts said.

Platinum fell 0.6% to $968.00 and palladium lost 2% to $1,028.34.

(Reporting by Ashitha Shivaprasad and Anjana Anil in Bengaluru; Editing by Pooja Desai and Ravi Prakash Kumar)