(Bloomberg) -- Gold pared gains as demand for safe-haven assets eased after Iranian media seemed to downplay the effect of Israeli strikes, indicating a lowering of geopolitical risk.

Israel reportedly struck back at Iran on Friday morning, hitting a military site in a drone operation that was limited in scale and seemed to cause little damage. Bullion was up 0.6% at midday in New York after earlier rising as much as 1.6% on concerns over a wider regional conflict in the Middle East roiled global markets. Appetite for safe havens such as the dollar and Treasuries also waned. 

The precious metal is on course for a fifth straight weekly gain, the longest winning streak since January 2023. That’s despite the fact that the dollar and bond yields have risen strongly while expectations for rate cuts in 2024 have slumped.

“It is increasingly clear that normal reaction functions have been abandoned with gold,” said Ole Hansen, head of commodity strategy at Saxo Bank AS. Bullion typically rises when the dollar and rates slip, and vice versa. 

Hansen said the current drivers behind gold’s 16% rally this year is a combination of geopolitical risks related to the Russia-Ukraine war and the Middle East; strong retail demand in China; central bank demand; rising debt-to-GDP ratios among major economies; and a potential reacceleration in inflation outlook. 

Read More: Israel Hits Back at Iran With Limited Drone Strike on Air Base

Spot gold rose 0.6% at $2,393.41 an ounce at 12:04 p.m. in New York. The Bloomberg Dollar Spot Index rose 0.1%. Silver and palladium rose, while platinum fell.

--With assistance from Jason Scott, Sybilla Gross and Jack Ryan.

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