Oct 8 (Reuters) - Gold prices edged up on Thursday, after hitting a two-month low in the previous session, as investors weighed the Federal Reserve's uncertain interest-rate path against growing concerns over high levels of US debt.
Spot gold rose 0.4% to $4,126.78 per ounce by 2:16 p.m. EDT (1816 GMT), having touched its lowest level since August 5 on Wednesday as a firmer dollar and higher US Treasury yields weighed.
US gold futures for December delivery settled 0.4% to $4,157.
The dollar and 10-year US Treasury yields were elevated for a second straight session.
"The elevated yields seem to underscore a broadening worry about high levels of indebtedness. If debts are rising, then gold as the antithesis to fiat currencies and government assets is likely to be favored," said Nitesh Shah, commodity strategist at WisdomTree.
Fed policymakers were divided last month over the rationale for raising rates, the minutes showed. While "some participants" saw a hike as needed to keep the impact of energy and other price shocks at bay, a more hawkish core viewed it as necessary to guard against emerging demand-driven inflation.
"The minutes underscore the fact that there's no real predetermined path here, and that keeps the (gold) market a little bit more volatile," Shah added.
US Federal Reserve Governor Christopher Waller said on Thursday that additional rate hikes would likely be needed, but added there was "flexibility" about the pace of increases and left the door open for a pause in October.
Traders see a 17% chance of an October rate hike, but are pricing in an 81% probability of an increase in December, according to the CME's FedWatch tool.
Higher rates dim the appeal of non-yielding gold.
On the geopolitical front, tankers are facing a higher risk of attacks and intimidation as they try to get critical shipments through the Strait of Hormuz after Iran issued new warnings it would block routes that it has not authorized, sources said.
Among other metals, spot silver fell 1.9% to $58.98, platinum rose 0.1% to $1,637.41 and palladium was up 0.1% at $1,126.
Reporting by Pablo Sinha in Bengaluru; Editing by Leroy Leo, Diti Pujara and Shailesh Kuber
