KONTAN.CO.ID - JAKARTA. Gold prices held above the key $2,000 level on Monday, buoyed by safe-haven demand from an escalating Middle East conflict, while investors were on a cautious watch ahead of the U.S. Federal Reserve's policy meeting later this week.

Spot gold was down 0.2% at $2,001.37 per ounce by 0535 GMT. U.S. gold futures climbed 0.6% to $2,011.20.

Israeli air strikes hit areas near Gaza City's Shifa and Al-Quds hospitals early on Monday, and Palestinian militants clashed with Israeli forces in a border area east of the city of Khan Younis, in the enclave's south, Palestinian media reported.

Gold prices hit $2,009.29 an ounce on Friday, surpassing the key psychological $2,000 level for the first time since mid-May, as investors piled into safe-haven bullion.

Market participants now look forward to the U.S. central bank's policy decision due on Wednesday. While the Fed is widely expected to keep interest rates unchanged, the focus will be on Chair Jerome Powell's commentary.

"The spate of strong economic data means it will force the Fed to retain a hawkish undertone, despite raising concerns over the Middle East conflict," City Index senior analyst Matt Simpson said.

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"That should keep a floor under gold prices, which look quite comfortable above $2,000 at the start of the week."

U.S. consumer spending surged, while monthly inflation remained warm in September, the Commerce Department reported on Friday.

Inflation pressures will dog the world economy next year, with three-quarters of over 200 economists polled by Reuters saying the main risk is that it turns out higher than they forecast, suggesting interest rates will also remain higher for longer.

Although gold is seen as a hedge against inflation, higher interest rates dull non-yielding bullion's appeal.

Gold may break a resistance at $2,006 per ounce and rise into a range of $2,019 to $2,036, according to Reuters technical analyst Wang Tao.

Spot silver was flat at $23.12, platinum fell 0.4% to $900.28 and palladium rose 0.2% to $1,123.97.

Editor: Wahyu T.Rahmawati