Sept 21 (Reuters) - Gold edged lower on Monday, weighed down by a stronger dollar and profit-taking after a rally late last week, while market participants kept a close watch on the conflict in the Middle East.
Spot gold fell 0.6% to $4,349.99 per ounce by 1046 GMT. US gold futures were down 0.8% at $4,387.80.
The dollar gained, making greenback-priced bullion more expensive for holders of other currencies.
"The slightly firmer US dollar is adding to the pressure in gold, while some profit-taking after Friday's rebound is also playing a role," ActivTrades Director and CEO Ricardo Evangelista said.
Gold climbed to a one-week high of $4,399.41 per ounce on Friday, as lower oil prices helped ease some concerns about prolonged inflationary pressures.
Oil prices slid to their lowest in more than a week on Monday as investors hoped for diplomatic progress on the Iran war due to this week's UN meeting.
But concerns remained elevated as Iran and the United States exchanged new threats on Sunday, with President Donald Trump warning Iran would fail economically or face its leadership being wiped out if it didn't make a deal, and the Iranian military saying it would retaliate harshly against any fresh attack.
"Persistent inflation and further monetary tightening could create downside towards $4,000. On the other hand, a de-escalation in the US-Iran war could ease inflationary fears, leading to lower yields and a softer dollar, which could allow gold to approach the $5,000 level," Evangelista said.
The Bank of Japan became the latest big central bank to tighten on Friday, following rate increases by the Federal Reserve and the European Central Bank.
Traders are now pricing in an 88% chance of a US rate hike in December, according to the CME FedWatch Tool. FEDWATCH
Though gold is seen as an inflation hedge, rising rates tend to curb demand by making interest-bearing assets more attractive.
Among other metals, spot silver lost 0.2% to $66.08, platinum was steady at $1,800.33, while palladium was little changed at $1,301.83.
Reporting by Pablo Sinha in Bengaluru; Editing by Sonia Cheema and Louise Heavens
