Gold fell to its lowest in more than three weeks on Wednesday as the escalating Middle East conflict lifted oil prices, stoking inflation and rate-hike fears, while investors focused on upcoming US jobs data.
Spot gold nudged0.2% lower to $4,321.31 per ounce by 0639 GMT, after hitting its lowest since August 7 earlier in the session. Prices were headed for a fourth straight session of decline and remained below the 200-day moving average, a closely watched technical level.
US gold futures for December delivery fell 0.6% to $4,368.50.
The US dollar held firm, making greenback-priced metals costlier for buyers using other currencies.
The US and Iran found themselves back on a war footing after the most significant exchange in weeks. Oil prices rose for a third straight session, while US Treasury yields climbed.
"A rebound in oil prices after renewed US-Iran tensions added to inflation concerns. Pricier crude could continue to tighten monetary policy expectations and drive yields higher, limiting any rebound potential for gold," said Bas Kooijman, CEO and asset manager of DHF Capital S.A.
Gold is seen as a hedge against inflation, but higher interest rates weigh on its appeal as it offers no yield.
Traders are pricing in a 70% chance of a rate hike at the Federal Reserve's policy meeting this month, according to the CME FedWatch Tool.
Fed Governor Michael Barr said if inflation does not cool quickly, it will be time for the central bank to raise rates. Fed Chair Kevin Warshsignaled in his Jackson Hole speech last week that the Fed may need to hike.
Investors are now awaiting the ADP employment report, due later in the day, and the more crucial nonfarm payrolls data on Friday.
"Softer figures could ease the pressure on gold, while stronger data or more hawkish Fed comments may extend the decline," Kooijman said.
Among other metals, spot silver lost 0.5% to $63.96 per ounce, platinum edged 0.2% lower to $1,736.51 and palladium fell 0.4% to $1,305.25.
