Gold neared all-time highs on Monday as Israel and Iran exchanged missile and drone attacks, but the price saw a 0.6% pull-back as the market reacted more calmly than headlines suggested.
The price of the precious yellow metal rose from $3,375 an ounce on Thursday to over $3,440 on Friday as fighting between the two Middle Eastern countries broke out, and hit $3,451 in Asia trading on Monday.
However, the price dropped to $3,411 as the European session kicked in.
Oil prices, which also spiked on Friday, held roughly flat.
On the Israel-Iran conflict, Deutsche Bank macro strategist Jim Reid observed: "While both sides have traded retaliatory blows, they have so far avoided the most extreme escalatory steps.
"In Iran’s case, they have so far avoided targeting US facilities in the region, which would very likely trigger direct US involvement."
Donald Trump appeared to have a rare calming effect in this case, with Reuters reporting that he had discouraged Israel from trying to kill Iran’s Supreme Leader, Ayatollah Ali Khamenei, when an opportunity presented itself.
Kathleen Brooks, head of research at XTB, said: "President Trump seemed to calm fears when he said that the two sides could find a resolution, but they need to fight it out first.
"The prospect of US involvement in this conflict used to spook markets, however, now there is a chance that Trump could have a holistic influence."
The reports of Trump vetoing a mooted assassination of Iran’s Supreme Leader "suggests that he is already having a moderating impact on this conflict, although there has been no direct involvement by US troops", said Brooks.
"Due to this, there may need to be a major escalation in the conflict before we get another sharp upswing in oil and gold prices. Financial markets are very good at absorbing geopolitical risk, and Opec+’s supply boost is also helping to cushion the blow."
Reid said while the most negative scenarios from analysts indicated that oil and gold prices could rise further, the market was so far satisfied to keep its powder mostly dry.
He said that while Deutsche's strategy team have found a typical pattern where geopolitical shocks lead to the S&P 500 pulling back about -6% in three weeks after the shock but then rally all the way back in another three, "they believe this incident will likely be milder than this unless we get notable escalation".