* All precious metals head for weekly loss

* Brent crude gains over 14% so far this week

* US, Iran each attack infrastructure in risky escalation

(Updates for US morning session)

By Noel John

July 17 (Reuters) - Gold held steady on Friday, but was on

track for its biggest weekly loss in six as escalating U.S.-Iran

tensions drove energy prices higher, fuelling inflation fears

and reinforcing expectations of U.S. interest rate hikes.

Spot gold was unchanged at $3,970.35 per ounce by

0932 a.m. EDT (1332 GMT), holding near its lowest level since

July 1. Prices are down more than 3% so far for the week. U.S.

gold futures for August delivery fell 0.5% to $3,973.10.

The U.S. dollar rose for a second straight session, making

bullion more expensive for overseas buyers.

"The main drivers of the selloff in gold have been a

stronger U.S. dollar and higher global inflation fears, which

have sent global interest rates higher," said Chris Gaffney,

president of world markets at EverBank.

The U.S.escalated its renewed bombing campaign on Iran,

hitting bridges and an airport. Tehran responded with strikes on

U.S. bases across the Middle East.

Brent crude oil prices were up more than 14% for the week

following the attacks.

Bullion has fallen about 25% since the U.S.-backed war with

Iran began in late February, pressured by expectations that

war-driven inflation could keep interest rates higher for

longer.

While gold is seen as a hedge against inflation, higher

rates typically weigh on the non-yielding metal.

"Recent data have decreased the probability of a rate hike

at the next FOMC meeting, but global interest rates continue to

climb and the recent increase in oil prices could drive the

Federal Reserve to take a more hawkish stance on U.S. interest

rate policy," Gaffney said.

Traders are now pricing in about a 53.3% chance of a U.S.

interest rate hike in September, according to the CME FedWatch

Tool.

On Thursday, Fed Vice Chair Philip Jefferson suggested he

would be open to raising rates if there was no near-term

improvement in inflation.

However, "gold's share in private portfolios remains low,

and recent geopolitical developments, including Iran and broader

tensions, may accelerate diversification beyond central banks to

private investors," Goldman Sachs said in a note.

Among other metals, spot silver fell 0.8% to $55.05,

platinum dropped 3.3% to $1,563.49, and palladium

slipped 1.5% to $1,230.42. All three metals were headed for

weekly losses.