Rewrites for EMEA morning hours

By Sumit Saha

July 9 (Reuters) - Gold edged higher on Thursday as the dollar weakened, though investors remained cautious, closely watching developments in the Middle East for their impact on inflation and monetary policy.

Spot gold XAU= rose 0.8% to $4,106.82 per ounce by 0901 GMT, after dropping to its lowest since July 1 on Wednesday.

U.S. gold futures GCcv1 for August delivery were up 0.8% to $4,116.40.

"Gold is trying to form a bottom today as dollar strength eases," said Nikos Tzabouras, senior market analyst at Jefferies-owned Tradu.com.

However, the higher-for-longer rate environment is detrimental for non-yielding assets like gold, which can lead to deeper declines, said Tzabouras.

The U.S. dollar ticked lower, making greenback-priced gold more affordable for other currency holders. USD/

The U.S. military said it carried out fresh strikes on Iran on Wednesday, prompting retaliatory attacks on Kuwait and Bahrain and raising tensions in the region.

U.S. President Donald Trump said Iran had reached out seeking a deal, easing some concerns over a further escalation in Middle East tensions.

Federal Reserve minutes released on Wednesday showed rising concern about inflation, with a handful of policymakers seeing grounds for a rate hike before the central bank opted to keep rates on hold last month.

Traders are currently pricing a 63% chance of an interest rate hike in September, the CME FedWatch tool showed. FEDWATCH/

The market will be closely watching next week's inflation data and Fed Chair Kevin Warsh's congressional testimony for fresh direction.

HSBC cut its 2026 average gold price forecast to $4,560 per ounce from $4,864, while reducing its 2027 forecast to $4,925 from $5,000. HSBC expects greater official sector demand for gold later in the year based on long-term diversification.

Elsewhere, spot silver XAG= rose 1.4% to $59.14 per ounce, while platinum XPT= rose 2.5% to $1,618.29 and palladium XPD= gained 2.8% to $1,247.37.