(Updates for US mid-session trading)

* Oil gains after vessels attacked near Strait of Hormuz

* China's central bank bought gold for 20th month

* Spot silver down over 1%

By Sukanya Mitra

July 7 (Reuters) - Gold fell on Tuesday as investors

monitored escalating hostilities in the Middle East that sent

oil prices higher, and braced for minutes from the U.S. Federal

Reserve's June meeting for guidance on the monetary policy

outlook.

Spot gold was down 0.6% at $4,138.39 per ounce by 11:55

a.m ET (1555 GMT), while U.S gold futures for August

delivery fell 0.5% to $4,148.50.

Bullion hit a two-week high on Monday as a softer-than-expected

U.S jobs data last week prompted markets to dial back near-term

interest rate-hike expectations.

However, "I think the reality is setting in that the Fed is

still very much focused on reigning in inflation - so higher for

longer still seems the most likely Fed path," said Peter Grant,

vice president and senior metals strategist at Zaner

Metals.

Traders still expect a 60% chance of a rate hike in September,

according to the CME FedWatch Tool.

Attention is now turning to the Fed's meeting minutes,

scheduled for release on Wednesday.

In the Middle East, two tankers were hit in the Strait of Hormuz

and Iran said there would be no more peace talks unless U.S.

President Donald Trump halted his repeated threats to restart

the war. Oil prices edged higher following the news.

Gold often comes under pressure when inflation concerns keep

interest rates elevated, reducing the appeal of non-yielding

assets such as bullion.

Meanwhile, China's central bank maintained gold purchases for a

20th straight month, with its reserve hitting 75.44 million fine

troy ounces by the end of June, up from 74.96 a month earlier.

Hong Kong launched a central clearing system for gold on Tuesday

and also revived gold futures trading as it seeks to become a

regional reserve hub for bullion.

Among other metals, spot silver dropped 2.6% to $60.46

per ounce. Platinum rose 0.5% to $1,639.18, and palladium

gained 0.1% to $1,271.33.