Updates for Asia morning session

By Pablo Sinha

June 30 (Reuters) - Gold prices fell more than 1% on Tuesday and were set for their biggest monthly decline since October 2008, as uncertainty in the Middle East gave way to expectations of U.S. interest rate hikes to tame elevated inflation.

Spot gold XAU= declined 1.5% to $3,956.92 per ounce by 0221 GMT, shedding 12.7% so far in the month in what would be its fourth straight monthly fall. U.S. gold futures GCcv1 for August delivery lost 1.7% to $3,969.30.

Bullion was also set for its first quarterly fall since 2024 and the largest since the June quarter of 2013, as the Iran war sent energy prices sharply higher, stoking inflation fears and bets for interest rate hikes.

"You have high inflation, high interest rate expectations, and a strong dollar, and that's overriding all other bullish factors that are typically associated with a gold rally," said Edward Meir, an analyst at Marex.

While gold is traditionally seen as a hedge against inflation, it loses its appeal in a high-interest-rate environment.

Traders expect three Federal Reserve rate hikes this year, and are currently pricing in about a 64% chance of a September increase, according to the CME FedWatch Tool. FEDWATCH/

Investors are now awaiting the June ADP employment and nonfarm payroll data, both due this week, to further gauge the Fed's stance on rate hikes.

The U.S. dollar was headed for a second monthly gain, making bullion more expensive for holders of other currencies. USD/

Oil prices were on track for their sharpest quarterly decline since 2020 as investors eyed the outcome of Iranian and U.S. talks in Doha this week, even as Iran said no meeting had been scheduled.

Meir sees gold trading in the $3,500 to $4,400 range in the second half of the year.

Spot silver XAG= fell 2% to $57.13 per ounce, platinum XPT= lost 1.1% to $1,557.21 and palladium XPD= slid 0.4% to $1,208.17. All three metals were headed for quarterly and monthly losses.