Updates for US market close

By Sukanya Mitra

July 8 (Reuters) - Gold prices fell on Wednesday as oil prices surged and inflation concerns intensified after U.S. President Donald Trump said an interim agreement aimed at ending the conflict with Iran was "over".

Spot gold XAU= dropped 0.9% to $4,067.39 per ounce by 2:10 p.m. EDT (1810 GMT) after hitting its lowest level since July 1 earlier in the session.

U.S. gold futures GCcv1 for August delivery settled 1.8% lower at $4,082.40 per ounce.

"The main factor for today's move is the increased escalation in tensions between the U.S. and Iran, with a potential ceasefire over, we've seen risk assets across the board trade lower, gold included," said David Meger, director of metals trading at High Ridge Futures.

In a flare-up of hostilities, Iran said it had targeted U.S. military sites in Bahrain and Kuwait after U.S. forces struck Iranian targets in response to attacks on tankers in the Strait of Hormuz. Crude oil prices jumped more than 5%. O/R

Higher energy prices can fuel inflation and potentially prompt central banks to hike interest rates to contain price pressures. Although gold is often viewed as a hedge against inflation, the non-yielding metal tends to lose appeal in a high-interest-rate environment.

Meanwhile, concern about high inflation mounted at the Federal Reserve's meeting last month, amid worries that price increases were broadening and might require interest rate hikes.

A few participants at the June 16-17 meeting saw a case to raise rates right away, minutes of the meeting showed on Wednesday.

Traders are pricing in about a 69% chance of a U.S. rate hike in September, up from 62% on Tuesday, according to the CME FedWatch Tool. FEDWATCH/

Bank of America, in a note dated Tuesday, said it is reducing 2026 average gold forecasts by 14% to $4,360 on a more hawkish Fed, but added that it still sees $5,000 in reach once the tightening cycle ends.

Among other metals, spot silver XAG= fell 2.9% to $58.25 per ounce, platinum XPT= shed 3.6% to $1,580.92, and palladium XPD= dipped 4.5% to $1,219.84.