Gold hits near two-week low on Fed chief's hawkish stance

Spot silver XAG= fell 0.5% to $66.68, platinum XPT= declined 0.7% to $1,807.37 and palladium XPD= slipped 1.1% to $1,405.75.

BMI said silver prices were likely to stay near current levels, supported by steady investment demand and constrained mine supply, while easing physical tightness and softer demand would limit further gains.

Gold fell on Monday to its lowest in nearly two weeks after U.S. Federal Reserve Chair Kevin Warsh signalled that interest rate hikes may be needed to ease price pressures, while escalating Middle East tensions fuelled inflation fears.

Spot gold XAU= was down 0.3% at $4,439.31 per ounce, as of 0643 GMT, after hitting its lowest level since August 19 earlier. Prices dropped over 3% on Friday.

U.S. gold futures GCcv1 declined 0.9% to $4,489.50.

"Gold is still licking its wounds after the hawkish tone struck by Warsh at Jackson Hole. U.S. military action in Iran has put upward pressure on oil prices, and this has added to gold’s woes from an inflation standpoint," said Tim Waterer, chief market analyst at KCM Trade.

Though viewed as a hedge against inflation, gold typically loses appeal in a rising interest rate environment as it does not yield interest.

The Fed will "have work to do" if policymakers don't get the confidence they need that inflation is heading down to 2%, Warsh said on Friday at the Jackson Hole economic symposium, coming closer than he has to acknowledging rate hikes may be needed.

Markets currently see a 60% chance of a Fed rate hike in September, according to the CME FedWatch tool.