Aug 4 (Reuters) - Gold prices gained 1% on Tuesday, supported by a decline in oil prices that tempered inflation fears and lowered U.S. interest rate hike bets, while markets awaited further clues on the Federal Reserve's policy path.
Spot gold rose 1% to $4,092.43 per ounce by 12:50 p.m. EDT (1650 GMT), while U.S gold futures gained 1.5% to $4,149.50.
Oil prices fell to a three-week low after comments by Qatari and U.S. officials raised hopes for a diplomatic resolution to the Iran war that could improve oil flows through the Strait of Hormuz. Brent crude futures were down over 4% on the news.
Lower oil is probably one of the drivers supporting gold prices, said Bart Melek, global head of commodity strategy at TD Securities, adding that the decline in many ways has contributed to the interest rate outlook with short-term rates falling a little bit.
Elevated energy prices reinforce expectations that the Fed will keep interest rates higher-for-longer to combat inflation, weighing on non-yielding bullion.
Earlier on Monday, Fed's New York President John Williams said he remained optimistic that inflation pressures were on track to ease gradually, but if they do not, the U.S central bank will not hesitate to respond with rate hikes.
Traders are now pricing in about a 57% chance of a rate hike in the central bank's September meeting after a divided Fed kept rates unchanged at its last policy meeting.
Market participants are now awaiting a series of U.S jobs reports this week, including the ADP employment report due on Wednesday and the nonfarm payrolls data on Friday.
Among other metals, spot silver gained 2.8% to $59.82 per ounce, platinum climbed 7.1% to $1,745.42, and palladium rose 7.1% to $1,355.13.
"The Platinum Group Metals are getting the full effect of a probable de-escalation in Iran with, being industrial metals, their fortunes being tied to a possible recovery in conventional off take," independent analyst Ross Norman said.
Reporting by Sukanya Mitra in Bengaluru and Polina Devitt in London; Editing by Shailesh Kuber and Joyjeet Das
