By: Reuters

Gold prices fell more than 1% on Wednesday after U.S. President Donald Trump said an interim peace deal with Iran was "over", sending oil prices higher and reviving fears of inflation and higher interest rates.

Spot gold XAU= fell 1.4% to $4,049.92 per ounce by 1027 GMT, its lowest level since July 2. U.S. gold futures GCcv1 for August delivery shed 2.3% to $4,059.80/oz.

Oil prices rose more than 6% after Trump said that the memorandum of understanding signed with Iran to end their four-month conflict in June was "over", adding he didn't want to engage with Tehran. O/R

The spike in oil prices revives fears of a spike in inflation, which could impact the Fed's policy decision at upcoming meetings, said UBS analyst Giovanni Staunovo, adding that the focus now is on whether additional oil supply gets disrupted in the coming weeks.

Earlier, Iran's Revolutionary Guards said they targeted U.S. military bases in Bahrain and Kuwait following U.S. strikes on Iran and the revocation of a license to allow the country to sell oil.

While gold is considered an inflation hedge, higher interest rates aimed at curbing inflation tend to weigh on the non-yielding metal.

Markets currently expect a 68% chance for a U.S. rate hike in September, compared to 62% on Tuesday, the CME FedWatch tool showed. FEDWATCH/

Fed's minutes, due at 1800 GMT, will be closely watched for clues on the future interest rate outlook.

"Gold will remain under pressure in the coming sessions, with the prospects of new 2026 lows rising against a backdrop of heightened geopolitical tensions and Fed rate hike bets", said Nikos Tzabouras, senior market analyst at Jefferies-owned Tradu.com.

Among other metals, spot silver XAG= fell 2.6% to $58.45 per ounce, platinum XPT= slipped 4.1% to $1,574.03, and palladium XPD= dropped 4.9% to $1,214.96.

Gold vs Brent https://tmsnrt.rs/4h2wOq9

(Reporting by Sumit Saha in Bengaluru; Editing by Harikrishnan Nair and Diti Pujara)