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Gold prices edged higher on Friday but were headed for a third consecutive weekly fall as expectations of a U.S. rate hike strengthened, while traders awaited U.S. consumer price index data for further clues on the Federal Reserve's policy path.

Spot gold was up 0.2% at $4,324.79 per ounce, by 0020 GMT, but down more than 2% for the week so far. U.S. gold futures for December delivery were down 1% at $4,364.70.

The U.S. inflation report is due at 1230 GMT.

Data on Thursday showed that Producer Price Index for final demand rose 0.4% in August after an upwardly revised 0.1% gain in July. Following which, traders nudged up bets that the Fed will raise interest rates at its meeting next week and spot gold subsequently fell nearly 2%.

"A stronger-than-expected reading would reinforce the case for several interest rate increases, potentially pushing Treasury yields and the dollar higher and placing additional pressure on gold," said Wael Makarem, financial markets strategists lead, Exness.

"Ongoing Middle East tensions could continue to weigh on gold through higher inflation expectations."

Despite gold being known as an inflation hedge, rising interest rates often pressure the metal, which offers no yield.

Iran-aligned Houthis seized control of Yemen's port city of Mocha and advanced down the Red Sea coast to strategic islands, military sources said, hours after U.S. President Donald Trump said he expected the Iran war to end after the midterm elections.

Oil prices rose and both major benchmarks are on track to end the week at over $100-a-barrel level for the first time since mid-May. [O/R]

Among other metals, spot silver fell 0.3% to $63.39 and has lost more than 4% for the week. Platinum eased 0.2% at $1,773.93 while palladium lost 0.3% to $1,278.51, with both metals headed for weekly declines.