Gold falls 2% as escalating Middle East tensions reinforce US rate-hike bets

July 16 (Reuters) - Gold fell 2% to a more than two-week low on Thursday, as escalating Middle East tensions pushed oil prices and U.S. Treasury yields higher, heightening inflation concerns and reinforcing expectations of elevated U.S. interest rates.

Spot gold XAU= was down 1.9% at $3,984.64 per ounce by 2:05 p.m. EDT (1405 GMT), after falling as much as 2% and touching its lowest since July 1 earlier in the session. U.S. gold futures GCcv1 settled 1.5% to $3,992.10.

Fed Chair Kevin Warsh this week declared his determination to bring inflation down without specifically hinting at how.

Meanwhile, data released on Tuesday showed that U.S. consumer inflation slowed in June, while data from Wednesday showed a decline in the producer price index.

"Even if some of the near-term economic data softens, persistently high energy prices would make it difficult for the Fed to adopt a more dovish stance. For the same reason, investors are preferring the dollar over the zero-yielding gold," Fawad Razaqzada, market analyst at Forex.com, said in a note.