Oct 9 (Reuters) - Gold advanced more than 1% on Friday on a combination of cooling oil prices and a softer US dollar, with markets weighing the likelihood of further Federal Reserve interest-rate hikes.
Spot gold rose 1.4% to $4,189.99 by 0842 GMT, heading for a weekly gain.
US gold futures for December delivery also added 1.4%, trading at $4,215.30 per ounce.
Oil prices fell on Friday as worries over Middle East supply disruptions subsided after US President Donald Trump said the country would not attack Iran before the US midterm elections next month, amid talks to end a war that has disrupted global energy markets.
"This strengthens the case for a Fed hold this month, weighing on the greenback and pulling yields back from their highs, creating prime conditions for a bullion recovery," said Nikos Tzabouras, senior market analyst at Jefferies-owned Tradu.com.
A softer dollar makes greenback-denominated bullion less expensive for holders of other currencies.
However, Tzabouras added that gold continues to face a challenging environment, leaving it vulnerable to renewed declines.
"Macro-geopolitical uncertainty and inflationary pressures persist, markets still expect Fed rate hikes ahead and bond yields remain elevated, keeping the opportunity cost of holding gold uncomfortably high."
Gold is traditionally seen as a hedge against inflation, but higher interest rates dim the appeal of the non-yielding asset.
St. Louis Fed President Alberto Musalem said on Thursday the US central bank will need to hike rates again to bring inflation back to its 2% target, although he declined to say what policymakers should do at their meeting later this month.
Last month, the US central bank voted unanimously to raise the policy rate by a quarter of a percentage point.
Traders are pricing in a 19% chance of a rate hike in October and an 84% probability of at least one 25-basis-point increase by December, according to the CME's FedWatch tool.
Among other metals, spot silver gained 1.7% to $60.36 per ounce, platinum climbed 3.4% to $1,690.49 and palladium jumped 3.7% to $1,162.18.
Reporting by Elizaveta Zhuravleva in Gdansk, Editing by Xevi Fontdegloria
