Oct 12 (Reuters) - Gold prices fell on Monday after hitting a one-week high earlier in the session, as a firm dollar weighed on bullion and investors braced for US inflation data that could reshape expectations for the Federal Reserve's rate path.
Spot gold slipped 0.5% to $4,171.18 per ounce by 1132 GMT, having hit its highest level since October 2 earlier in the session. US gold futures for December delivery dropped 0.5% to $4,195.50 per ounce.
"Gold is under pressure from a dollar that remains near recent highs, with investors adopting a cautious stance ahead of this week's release of US inflation figures," said ActivTrades director and CEO Ricardo Evangelista.
The dollar held its ground near the strongest level in a year and a half on Monday as an escalating Middle East conflict kept investors wary ahead of key US inflation data later this week that will influence monetary policy.
The US Consumer Price Index (CPI) report is due on Wednesday, followed by the Producer Price Index (PPI) and retail sales data on Thursday.
"Higher-than-expected readings could reinforce expectations of further Fed tightening, pushing Treasury yields and the dollar higher and putting further pressure on gold. Conversely, softer figures could ease those expectations and provide some support to the precious metal," Evangelista added.
Markets have pared bets on a Fed rate hike this month, with traders pricing in an 18% chance of an increase, while still seeing an 85% probability of a hike by December, according to CME's FedWatch tool.
In a high-interest-rate environment, investors tend to favor yield-generating assets over gold.
Oil prices oscillated on Monday as the market considered possible further supplies after US President Donald Trump hailed fresh Russian diesel exports against supply-constricting signals after major attacks on Saudi Arabia.
Among other metals, spot silver fell 0.3% to $60.62 per ounce, platinum slipped 0.2% to $1,690.90 per ounce and palladium rose 0.6% at $1,154.21 per ounce.
Reporting by Vishak Mathew in Bengaluru; Editing by Vijay Kishore
