PRECIOUS-Gold feeble as Fed rate-hike bets rise; eyes best month since January

Updates prices

By Sukanya Mitra and Swati Verma

Aug 31 (Reuters) - Gold traded near a two-week low on Monday as renewed Middle East attacks stoked inflation worries and hawkish comments from Federal Reserve Chair Kevin Warsh boosted expectations for a September rate hike, though bullion remained on track for its biggest monthly gain since January.

Spot gold XAU= was little changed at $4,455.19 per ounce by 1210 GMT, having touched its lowest level since August 19 earlier. U.S. gold futures GCcv1 for December delivery dropped 0.5% to $4,506.60.

Bullion declined over 3% on Friday, in its biggest one-day fall since June 10, after Warsh said at the Jackson Hole symposium that the U.S. central bank would "have work to do" if policymakers were not confident inflation was returning to its 2% target.

"Gold remains under pressure following Kevin Warsh's hawkish address on Friday, while renewed U.S.-Iran tensions are adding to inflation concerns, increasing expectations of a Fed rate hike before the end of the year," ActivTrades senior analyst Ricardo Evangelista said.

"A return above $4,600 would probably require a weak U.S. labour report and an easing of tensions in the Persian Gulf, allowing Treasury yields and the U.S. dollar to soften," Evangelista said.

Traders have raised bets on a September rate hike to 62%, from about 36% before Warsh's comments, according to the CME FedWatch Tool. FEDWATCH/

Oil prices rose more than 3% on Monday after the U.S. attacked an Iranian island in the Strait of Hormuz and drew a response from Tehran. O/R

Despite the recent pullback, gold was still up more than 10% this month, its biggest monthly gain since January.

Bullion hit a more than three-month high of $4,696.18 last week after the U.S. Treasury announced plans to double liquidity-support buybacks of longer-dated bonds, raising concerns about currency debasement.

The U.S. ADP employment report and the nonfarm payrolls data are due later this week.

Elsewhere, spot silver XAG= rose 1.4% to $67.28 per ounce, and is up over 19% this month after hitting its highest since mid-June on Friday.

Platinum XPT= slipped 0.7% to $1,807.50, and palladium XPD= slid 1.4% to $1,402. Both metals were headed for their biggest monthly rise since December.

(Reporting by Sukanya Mitra and Swati Verma in Bengaluru; Editing by Louise Heavens and Leroy Leo)

((sukanya.mitra@thomsonreuters.com))