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Tehran downplays Israel's retaliatory attacks

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Investors gravitating back towards riskier assets

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PCE inflation data due out on Friday

(Recasts, adds analyst comment and updates prices, as of 0451

GMT)

By Sherin Elizabeth Varghese

April 22 (Reuters) - Gold prices dipped on Monday, as

easing fears of a wider Middle East conflict lowered bullion's

safe-haven appeal, while market participants awaited a key U.S.

inflation reading due later this week for interest rate cues.

Spot gold fell 0.9% to $2,369.97 per ounce, as of

0451 GMT. U.S. gold futures fell 1.2% to $2,383.80.

Tehran downplayed Israel's retaliatory drone strike against

Iran, in what appeared to be a move aimed at averting regional

escalation.

Gold slipped on Monday after rising as high as $2,417.59 in

the previous session, a level not far away from a record high of

$2,431.29 hit on April 12.

"Right now, there is a lack of catalyst for gold prices to

actually push up higher. At this juncture, it seems to us that

the market is now coming to the realisation on the higher cost

of holding gold," said Kelvin Wong, a senior market analyst for

Asia Pacific at OANDA.

Asian stocks recovered some losses and bond yields rose as

fears of a wider Middle East conflict ebbed, with investors

gravitating back towards riskier assets.

Benchmark 10-year U.S. Treasury yields edged up

and were last at 4.6599%, making non-yielding bullion less

attractive.

Nevertheless, Wong said the geopolitical risk premium

remained positive in the medium to long term as the conflict

between Israel and Hamas lacked clarity or signs of ceasefire.

Meanwhile, progress on bringing down inflation has "stalled"

this year, Chicago Federal Reserve President Austan Goolsbee

said, echoing other Fed officials who believe that rates will

need to stay high for longer to get price pressures under

control again.

Higher interest rates increase the opportunity cost of

holding non-yielding bullion.

The personal consumption expenditures price index, the Fed's

preferred inflation gauge, is due on Friday.

Among other precious metals, spot silver fell 2.3% to

$27.99 per ounce, spot platinum rose 0.3% to $934.03, and

palladium fell 0.3% to $1,023.17.