Gold steady as markets assess Middle East escalation, Fed hike bets

Elsewhere, spot silver XAG= gained 1.7% to $56.87 per ounce, platinum XPT= was steady at $1,592.34, and palladium XPD= inched 0.1% higher to $1,249.25.

Cleveland Fed President Beth Hammack added her voice to a growing chorus of policymakers arguing interest rates may need to rise to beat back persistent inflation, setting up a charged debate at the Fed's next meeting on July 29.

Traders are now pricing an 82% chance of a December interest-rate-hike, versus 73% last week, according to the CME FedWatch tool.

"On the longer term, I'm more cautious on gold and looking at the key $3,886 level, which, if taken out on the downside, could potentially unleash further weakness towards $3,500," said Kelvin Wong, a senior market analyst at OANDA.

Oil prices jumped over 3% after U.S. forces struck Iran for a ninth consecutive day on Monday as the number of confirmed American military deaths in the renewed fighting rose to three and concerns grew over shipping through the Strait of Hormuz.