Gold prices rose slightly on Thursday, steadying from a sharp tumble this week as strong U.S. data spurred increasing doubts over early interest rate cuts by the Federal Reserve.

The yellow metal wiped out most gains made through December, and came close to breaking below the coveted $2,000 an ounce level as the dollar and Treasury yields rebounded this week.

Increased military action in the Middle East also did little to spur safe haven demand for gold, with traders instead pivoting into the dollar on the prospect of higher-for-longer U.S. rates.

Still, gold prices found some support around the $2,000 an ounce level, and saw a mild recovery on Thursday.

Spot gold rose 0.1% to $2,008.89 an ounce, while gold futures expiring in February rose 0.2% t o$2,010.40 an ounce by 23:56 ET (04:56 GMT). Both instruments were trading down nearly 2% each for this week.

March rate-cut bets recede after strong retail sales data

The dollar shot up to a one-month highs, while Treasury yields saw extended gains after retail sales data for December read stronger than expected.

The data lent further credence to recent comments from Fed officials that resilience in the U.S. economy will see the central bank keep rates higher for longer.

This notion saw traders further scale back bets that the bank will begin trimming interest rates by as soon as March 2024, according to the CME Fedwatch tool. Traders are pricing in a 59.8% chance of a 25 basis point cut in March, down from 67.3% seen last week.

Higher rates dent the appeal of gold by pushing up the opportunity cost of investing in the yellow metal.

While gold had seen some relief in December, briefly hitting record highs amid bets on early interest rate cuts, the outlook for the yellow metal now turns uncertain in the face of higher-for-longer rates.

Copper prices at 1-mth low as China sentiment worsens

Among industrial metals, copper price steadied on Thursday after logging sharp losses this week, amid worsening sentiment towards China and pressure from the dollar.

Copper futures expiring in March fell 0.1% to $3.7395 a pound, and were trading close to their weakest levels since early-December.

The red metal clocked heavy losses after top importer China posted weaker-than-expected GDP figures for the fourth quarter, spurring increased concerns that softening economic conditions in the country will dent its appetite for copper.

The outlook for copper was also dulled by weaker forecasts for electric vehicle sales this year. Increased EV demand was initially pegged to be a key driver of copper prices in the coming years.