Gold falls as Mideast uncertainty clouds rate outlook

Gold prices fell for a second session on Wednesday as expectations for a swift resolution to the U.S.-Iran conflictfaded, keeping inflation concerns alive and clouding the interest rate outlook. Spot gold was down 1.3% at $4,448.43 per ounce, as of 1110 GMT. U.S. gold futures for June delivery fell 1.3% to $4,446.20. Iran said on Tuesday the United States had violated a ceasefire by striking targets near the contested Strait of Hormuz, potentially complicating efforts to bring the war to a close. "Prices have dropped, approaching support at $4,450 as hopes waver for a U.S.-Iran peace deal. Adding to gold's woes are steadily rising expectations that the Federal Reserve will raise interest rates amid conflict-induced price pressures," said Lukman Otunuga, senior research analyst at FXTM. "Ultimately, further signs of rising price pressure may reinforce bets that the Fed will keep interest rates higher for longer – exposing gold to greater downside risk." Minneapolis Fed President Neel Kashkari said on Wednesday that the central bank must focus on containing inflationary risks that appear to be building, though it was "far too soon" to predict when it could next change interest rates. Investors are pricing in a Fed rate hike this year, with a 37% chance of a 25 basis-point hike in December, according to CME Group's FedWatch tool. While gold is often seen as a hedge against inflation, higher rates tend to weigh on the non-yielding metal. Investors also await comments from other Fed policymakers, including Vice Chair Philip Jefferson and Governor Lisa Cook, to gauge the impact of inflation on future monetary policy stance. The April U.S. Personal Consumption Expenditures (PCE) data, due on Thursday, could offer more clues on the monetary policy. Meanwhile, "any de-escalation (in the U.S.-Iran conflict) generally has a positive effect on the gold price, which is why we expect the gold price to rise again by the end of the year," Commerzbank said in a note. Spot silver fell 3.3% to $74.38 per ounce, platinum slid 1.9% to $1,921.04, and palladium was down 0.4% at $1,385.03.