Gold prices rose slightly in Asian trade on Tuesday, steadying after racing to record highs earlier in the week as persistent expectations of a less dovish Federal Reserve and increased safe haven demand supported the yellow metal.

The yellow metal saw an abnormally large jump in early trade on Monday, with spot prices briefly hitting a lifetime high of $2,148.78 an ounce before tumbling sharply from the peak.

A mix of factors drove the surge, with the most prominent being somewhat less hawkish signals from the Federal Reserve, which ramped up expectations for early interest rate cuts by the central bank.

Safe haven demand for the yellow metal rose after an attack on U.S. vessels in the Red Sea pushed up concerns over a broader conflict in the Middle East. A separate, unrelated attack on a prominent gold mine in Peru also pushed up some fears of supply disruptions in gold markets.

But while gold came off sharply from its record peaks, it still settled well above the coveted $2,000 an ounce level, indicating that more gains could still be on tap. Spot gold rose 0.2% to $2,032.60 an ounce, while gold futures expiring February rose 0.4% to $2,050.35 an ounce by 00:19 ET (05:19 GMT).

Markets reassess rate cut bets before nonfarm payrolls data
Anticipation of key U.S. nonfarm payrolls data this Friday saw markets somewhat taper recent optimism over early interest rate cuts by the Federal Reserve.

Fed Fund futures prices showed traders now pricing in a 49% chance the central bank will trim rates by as soon as March 2024, down substantially from the 60% chance seen at the beginning of the week.

This uncertainty also helped the dollar rebound further from recent lows, which in turn diminished gold’s recent gains.

Still, the yellow metal is expected to remain largely well-bid, as markets remained convinced that the Fed was done raising interest rates in this cycle. Rising interest rates push up the opportunity cost of investing in bullion- a trade that had battered the yellow metal earlier this year.

Gold was also sitting on strong gains through November.

Copper prices steady amid mixed China cues
Among industrial metals, copper prices rose slightly on Tuesday, although traders of the red metal took mixed cues from major copper importer China.

Copper futures expiring in March rose 0.1% to $3.8303 a pound.

A private survey showed that China’s services sector activity grew more than expected in November, coming just a few days after a private survey showed unexpected resilience in the manufacturing sector.

But optimism over the readings was largely offset by growing concerns over a new epidemic in the country, following a spike in respiratory illnesses across major Chinese cities. Local media reports said that the National Health Commission- which was at the heart of the country’s draconian anti-COVID measures- was considering curbs on social gatherings.