Baghdad: Gold is on track for its biggest weekly loss in six weeks as escalating tensions between the United States and Iran have driven up oil prices, increasing inflationary pressures and raising the likelihood of a US interest rate hike. Spot gold rose 0.5% to $3,988.20 an ounce, after earlier hitting its lowest level since July 1, while US gold futures for August delivery settled at $3,992.

According to National Iraqi News Agency, the precious metal has lost 3.2% since the start of the week, its biggest drop since early June, as the impact of Middle East tensions outweighed the support provided by weaker-than-expected US inflation figures released this week. Oil prices have jumped about 12.0% since the start of the week due to limited oil flows through the Strait of Hormuz, and Tehran has asked the Houthis in Yemen to prepare to close the export route through the Red Sea.

The sharp rise in oil prices threatens to reignite inflation concerns and increase the likelihood of an interest rate hike. Gold, which does not yield interest, typically struggles when interest rates rise, as investors flock to assets offering better returns.

Among other precious metals, silver fell 0.5% to $55.22 an ounce in spot trading, platinum dropped 0.7% to $1,605.62, and palladium declined 0.4% to $1,244.86. All three metals are on track for weekly losses.