Oct 7 (Reuters) - Gold prices edged up on Monday as an escalation in the Middle East conflict pushed investors to safe haven assets, while traders awaited inflation data this week for further clues on the Federal Reserve's rate cut path.
Spot gold was up 0.2% at $2,658.07 per ounce by 1130 GMT. U.S. gold futures edged up about 0.4% at $2,677.90.
"Gold prices are caught in a tug of war between a strengthening U.S. dollar and ongoing safe-haven demand, likely keeping them near current levels. Upcoming U.S. economic data may be the deciding factor in breaking this stalemate," said Ricardo Evangelista, senior analyst at ActivTrades.
The market now awaits minutes of the Fed's last policy meeting and U.S. Consumer Price Index and Producer Price Index data this week.
"This week's CPI data is crucial for anticipating what the Fed would do, but I'm not expecting a surprise because the market is already pricing an almost 100% chance that the Fed will look at a rate (cut) by only 25 basis points," said Kinesis Money market analyst Carlo Alberto De Casa.
Traders now see a 95% probability that the Fed will cut rates by only a quarter of a percentage point next month, after a U.S. employment report on Friday pointed to a resilient economy that will probably prompt the central bank not to deliver large interest rate cuts for the rest of this year.
"The dollar recovering and going up wouldn't be a good scenario for gold but despite that bullion has managed to remain steady, confirming a strong interest of investors for bullion. Apart from that, geopolitical tensions have also supported gold demand," said De Casa.
Israel bombed targets in Lebanon and the Gaza Strip on Sunday ahead of the one-year anniversary of the Oct. 7 attacks that sparked the current conflict.
Spot silver fell 0.6% to $31.98, platinum lost 0.4% at $986.15 and palladium rose 0.9% to $1,020.78.
Reporting by Rahul Paswan and Ashitha Shivaprasad in Bengaluru; Editing by Shilpi Majumdar and Susan Fenton
