Gold dips as Fed rate-hike bets rise, still heads for best month since January

"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. Oil prices rose more than 3% on Monday after the U.S. attacked an Iranian island in the Strait of Hormuz and drew retaliation from Tehran.

Gold slipped on Monday as renewed Middle East attacks stoked inflation worries and hawkish comments from Federal Reserve Chair boosted expectations for a September rate hike, though bullion remained on track for its biggest monthly gain since January.

Spot gold (XAU=) fell 0.1% to $4,448.19 per ounce by 1030 GMT, having touched its lowest level since Aug. 19 earlier. U.S. gold futures (GCcv1) for December delivery dropped 0.7% to $4,498.90.

Bullion declined over 3% on Friday, in its biggest one-day fall since June 10, after Fed Chair Kevin 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.

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