Gold continued its losses on Friday, after falling about 2% in the previous session, as Brent crude rose back above $100 a barrel, raising inflation concerns and boosting expectations of a rate hike ahead of next week's Federal Reserve meeting.

Spot gold fell 0.5% to $4,027.54 per ounce by 05:23 GMT, retreating more than $130 from its two-week high hit on Wednesday. U.S. gold futures for August delivery also fell 0.5% to $4,029.60 per ounce.

Despite these losses, gold is on track for a slight weekly gain of about 0.3%.

Brian Lan, managing director of Gold Silver Central, said: 'We expect more volatility in the near term. Gold is currently trading in a range between $3,980 and $4,170, and it has been stuck in this range for weeks. Every time prices approach the $4,000 level or dip slightly below it, we see a strong return of buyers.'

U.S. President Donald Trump on Thursday threatened Iran and its Houthi allies with 'major military punishment'.

Brent crude jumped 7% on Thursday, surpassing $100 a barrel for the first time since May, in one of the fastest rallies since the outbreak of the war.

The rise in oil prices heightened fears of a return of inflationary pressures, reinforcing expectations that interest rates will remain higher for longer. Although gold is traditionally considered a hedge against inflation, its appeal diminishes in a high-interest-rate environment as it yields no return.

Investors are also awaiting the Federal Reserve meeting next week, where expectations are widely for rates to remain unchanged. However, markets price in an 81% probability of a rate hike in September, according to the FedWatch tool.

In Europe, the European Central Bank kept interest rates unchanged as expected, but left the door open for another hike in September.

Among other precious metals, spot silver fell 0.4% to $57.48 per ounce, but remains on track for a weekly gain of about 3%.

Platinum dropped 0.9% to $1,585.50 per ounce, and palladium fell 1.5% to $1,238.55, with both metals heading for weekly losses.