PRECIOUS-Gold slips over 1% on rate-hike fears ahead of U.S. inflation data

* US May CPI data due on Wednesday

* Traders see about 68% chance of US rate hike in December

* Oil falls after Iran, Israel halt strikes on each other (Updates with settlement price)

By Anushree Mukherjee

June 9 (Reuters) - Gold fell over 1% to a more than two-month low on Tuesday tracking a broader market sell-off and pressured by rising expectations of a U.S. interest rate hike this year, while investor focus turned to key inflation data due later this week.

Spot gold fell 1.5% to $4,264.70 per ounce as of 1:45 p.m. ET (1745 GMT), after falling more than 2% earlier in the session. Bullion fell to its lowest level since March 23.

U.S. gold futures for August delivery Settled 1.8% to $4,286.4.

"Traders are a little nervous with the market here... All markets across the board went into risk-off. And I think that risk-off right now is why you're seeing a down in gold," said Bob Haberkorn, senior market strategist at RJO Futures.

The S&P 500 and the Nasdaq fell to over one-month lows on Tuesday.

"Gold and silver remain under pressure until we get clearer guidance from the Fed," Haberkorn added. After last week's strong job numbers, focus has shifted to key inflation data this week, including the May U.S. Consumer Price Index print on Wednesday and Producer Price Index reading on Thursday, for more clues on the U.S. monetary policy outlook.

"Should the U.S. inflation data for May also surprise on the upside on Wednesday, the gold price is likely to fall further. This also increases the potential for a recovery later in the year, should, as we expect, the Fed not raise interest rates," Commerzbank said in a note.

Traders are pricing in about 68% chance of a Fed rate hike in December, according to the CME FedWatch tool.

Oil prices fell after Iran and Israel said they had halted attacks on each other following an appeal from U.S. President Donald Trump.

Elevated crude can fuel inflation and keep interest rates higher for longer. While gold is seen as an inflation hedge, higher rates tend to weigh on the non-yielding metal.

India's sharp increase in gold import tariffs is fuelling a resurgence in smuggling that could exceed 100 metric tons this year, as soaring grey market margins allow smugglers to undercut banks and refiners of the precious metal.

Spot silver fell 4.3% to $65.23 per ounce, platinum was down 2.1% at $1,717.30 and palladium lost 1.3% at $1,220.92. (Reporting by Anushree Mukherjee in Bengaluru; Editing by Shilpi Majumdar and Jonathan Ananda)