Gold slipped Monday as renewed Middle East tensions pushed oil and Treasury yields higher, fuelling inflation concerns and bets the Federal Reserve could raise interest rates in September.

Bullion fell 0.5% as US crude climbed above $85 a barrel. Traders are pricing in a more than 60% chance of a September hike after Fed Chairman Kevin Warsh vowed to fight inflation.

Gold remains up about 10% in August, heading for its biggest monthly gain since January after the US Treasury’s plan to ramp up bond buybacks revived the debasement trade.

Policy tug

The Treasury and Fed are in a “tug of war,” Nicky Shiels, head of research and metals strategy at MKS PAMP SA, said in a note. She expects the debasement trade to support gold into September.

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Meanwhile, the US and Iran exchanged strikes for the first time in about a month, with President Donald Trump saying Washington would respond to Iranian attacks on US forces.

Spot gold fell 0.5% to $4,434.78 an ounce at 1:12 p.m. in New York. Silver slipped 0.1% to $66.30, while platinum and palladium also declined.

(With files from Bloomberg)