- Spot gold rose over 2% on Tuesday
- US Producer Price Index due at 1230 GMT
July 15 (Reuters) - Gold prices slipped on Wednesday as escalating tensions in the Middle East continued to stoke inflation concerns, reinforcing expectations of higher U.S. interest rates.
Spot gold fell 0.7% to $4,027.49 per ounce by 0843 GMT. Prices rose over 2% to a session high of $4,100.19 per ounce on Tuesday after soft U.S. inflation data.
U.S gold futures for August delivery slid 0.9% to $4,034.00.
Iran's Islamic Revolutionary Guard Corps threatened to close all possible export corridors benefiting Washington, after Tehran shut the Strait of Hormuz and the U.S reimposed a naval blockade of Iranian ports. Oil edged higher after closing at a one-month high on Tuesday.
"Higher U.S. crude, gasoline and diesel prices will result in high inflation numbers in the next print in August, that could keep the tone of some Fed officials on the hawkish side, which is not helping gold," said UBS analyst Giovanni Staunovo.
"In the near-term oil and U.S. gasoline prices will continue to influence gold, as it remains a key driver of U.S. inflation." Staunovo added.
Higher interest rates tend to weigh on gold, as they increase the opportunity cost of holding the non-yielding asset.
Fed Chair Kevin Warsh told lawmakers on Tuesday the central bank had "no tolerance for persistently elevated inflation," hinting that the CPI data was not all swell.
Traders are pricing in about a 59% chance of a rate hike in September, according to the CME FedWatch Tool.
Investors now await the U.S. Producer Price Index data due at 1230 GMT today for insights into inflation levels and the monetary policy outlook.
Among other metals, spot silver dipped 0.5% to $58.314 per ounce and platinum gained 0.2% to $1,634.36.
Palladium rose 0.8% to $1,315.05, after gaining 5% in the previous session.
Reporting by Sukanya Mitra in Bengaluru; Editing by Diti Pujara
Source: Reuters