Meanwhile, gold traded at a steep discount in India this week, while demand in China remained steady after the central bank reported its largest monthly increase in gold reserves in more than 2-1/2 years in June.
Among other metals, spot silver XAG= fell 0.7% to $59.56 per ounce, platinum XPT= gained 0.4% to $1,616.72 and palladium XPD= rose 2.2% to $1,274.50.
Inflation worries keep central banks in focus
The recent escalation in hostilities between the U.S. and Iran could upend the International Energy Agency's forecast of a significant oil market surplus next year, it said on Friday.
Oil prices were poised for a weekly rise, propelled by supply concerns amid fresh U.S.-Iran strikes. Higher energy prices fuel inflation concerns, strengthening expectations of interest rate hikes by central banks.
While gold is generally viewed as an inflation hedge, higher interest rates tend to weigh on the non-yielding metal by increasing the appeal of interest-bearing assets.
"Every indication points toward the market worrying about inflation, particularly since oil has rebounded in the last few days. This will keep central banks diligent, particularly the Federal Reserve," Melek said.
Traders are pricing in about a 69% chance of a rate hike in September, according to the CME FedWatch Tool. The minutes from the Fed meeting in June showed a hawkish split as concern about high inflation mounted.
Investors are now eyeing next week's inflation data and Fed Chair Kevin Warsh's testimony for further insight into the monetary direction.
Gold eases on higher oil prices and rate-hike expectations
Gold eased on Friday and was on course for a weekly decline, as higher oil prices linked to the Middle East conflict fuelled inflation concerns and bolstered expectations of tighter U.S. monetary policy.
Spot gold XAU= slid 0.4% to $4,103.23 per ounce by 2:10 p.m. EDT (1810 GMT), and was down 1.7% for the week so far. U.S. gold futures GCcv1 for August settled around 0.7% lower at $4,113.70 per ounce.
"The major factor here is the restarting of tensions between the U.S. and Iran, with investors broadly not wanting to hold on to gold and silver at this point, which is why we've seen this move towards 4100," said Bart Melek, global head of commodity strategy at TD Securities.
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