PRECIOUS-Gold slips as Iran risks support dollar, keep inflation fears in focus

By Ashitha Shivaprasad

May 4 (Reuters) - Gold prices fell on Monday after Iran said it had struck a U.S. warship, boosting the dollar and reinforcing inflation concerns that kept expectations of higher interest rates alive.

Spot gold XAU= was down 0.9% at $4,572.40 per ounce, by 8:51 a.m. ET (1251 GMT). U.S. gold futures GCcv1 fell 1.3% to $4,583.70.

"Gold dips again, primarily on the issues surrounding the Strait of Hormuz. The latest news clearly didn't give the market confidence that everything is going to be okay and again raised the specter of inflation issues, along with fairly hawkish signals to the market on interest rates," said Bart Melek, global head of commodity strategy at TD Securities.

Iran said it had forced a U.S. warship to turn back from entering the Strait of Hormuz, but a U.S. official denied a report that it had been struck by Iranian missiles, according to an Axios journalist.

The U.S. dollar and oil prices gained after the news. A stronger U.S. currency makes dollar-priced metals more expensive for holders of other currencies. USD/ O/R

Meanwhile, soaring energy prices have intensified inflation fears, strengthening bets that central banks will keep interest rates higher for longer.

Barclays joined a growing list of brokerages to bet on no policy easing from the U.S. Federal Reserve this year. Last week, the Fed left rates unchanged in its most divided decision since 1992 on deepening concerns about higher energy prices percolating through the economy.

Key data due this week include U.S. job openings, the ADP employment report and the April payrolls report.

Even as gold serves as a hedge against inflation and geopolitical uncertainty, the metal loses appeal in a high-rate environment as it offers no yield.

"I see strong support levels around $4,200 for gold. I do think there are broader issues later in the year that could support prices. However, uncertainty and possible rate hikes could push some traders to exit positions in the near term," Melek said.

Spot silver XAG= fell 1.9% to $73.94, platinum XPT= lost 0.9% to $1,971.05, and palladium XPD= shed 2.4% to $1,488.28.