Market News

* U.S. CPI data due at 1230 GMT

* US producer prices rise less than expected in July

* Germany, Italy import legally dubious Brazilian gold - study

Aug 14 (Reuters) - Gold prices hovered near record highs on Wednesday, steered by hopes of U.S. interest rate reduction and persistent Middle East tensions, while the spotlight shifted to U.S. inflation data.

Spot gold was up 0.2% to $2,469.35 per ounce by 0827 GMT, shy of the record high of $2,483.60 scaled last month.

U.S. gold futures steadied at $2,508.40.

If data confirms the slowdown in U.S. prices, bets of a 50 bp rate cut in September will increase and it is very possible that the price of gold will reach an all-time high, said Ricardo Evangelista, senior analyst at ActivTrades.

The U.S. consumer price index data is due at 1230 GMT. Economists expect month-on-month inflation to rise 0.2%, with the annual core slowing a tick to 3.2%.

U.S. producer prices increased less than expected in July, data showed on Tuesday, indicating that inflation continued to moderate.

Markets see a 52.5% chance of 50 basis point U.S. rate cut in September, according to the CME FedWatch Tool.

Bullion is traditionally considered a hedge against geopolitical and economic risks, and lower interest rates reduce the opportunity cost of holding the asset.

In the Middle East, Iran has vowed a severe response to the killing of the leader of Hamas late last month. Israel has neither confirmed or denied its involvement.

There is a high likelihood of an Iranian strike on Israel, which could spark an all-out war that would affect the entire region and beyond, this scenario is playing in investors’ minds and feeding demand for safe-haven gold, Evangelista added.

Elsewhere, all Brazilian gold imports by Germany and 71% by Italy come from areas of the Amazon where illegal mining is rampant, a think thank said on Tuesday, calling for increased European scrutiny.

Spot silver was flat at $27.84 and platinum shed 0.1% to $935.50. Palladium gained 0.5% at $942.96. (Reporting by Ashitha Shivaprasad in Bengaluru; editing by David Evans)