To update prices and add analyst comments and details

July 16 (Reuters) - Gold prices fell on Thursday as escalating tensions in the Middle East continued to raise concerns about inflation and created uncertainty about the path of U.S. interest rates.

Spot gold fell 0.7 percent to $ 4,032.19 an ounce by 0834 GMT. U.S. gold futures for August delivery declined 0.4 percent to $ 4,037.20 .

“Gold remains subject to the influence of inflation and geopolitical conditions,” said Niko Tzaporas, market analyst at Jefferies-owned Tradeau.com. “The ongoing US strikes on Iran and the turmoil in the Strait of Hormuz are supporting oil prices and keeping inflation risks alive.”

On Wednesday, the United States launched two waves of attacks on Iranian coastal defenses and missile sites after reimposing a naval blockade on the Islamic Republic's ports, and Iran responded by targeting US military sites in neighboring countries.

The latest escalation comes days after a fragile temporary ceasefire agreement collapsed, fueling concerns about control of the Strait of Hormuz. Crude prices are on track for a weekly gain.

High energy prices fuel inflation fears, which in turn reinforce expectations of higher interest rates and reduce demand for gold as a non-yielding safe haven.

Data from the CME Group's FedWatch tool showed that traders expect a 51 percent probability that the Federal Reserve (the US central bank) will raise interest rates in September .

Council Chairman Kevin Warsh confirmed his intention to reduce inflation without indicating how this would be achieved.

Data released on Tuesday showed that US consumer price inflation slowed in June, sending spot gold prices jumping more than 2% immediately after the report's release. Data released on Wednesday also showed a decline in the producer price index.

Tzabouras said, "The weak consumer price index and producer price index readings remove the urgent need for the Federal Reserve to pursue a monetary tightening policy, and could provide a basis for the precious metal to eventually resume its recovery. However, this decline in inflation may be short-lived given the renewed rise in oil prices. Any de-escalation or resumption of peace talks would be the best-case scenario for gold."

Market participants are now awaiting comments from Dallas Federal Reserve President Lori Logan and Federal Reserve Vice Chairman Philip Jefferson, who are scheduled to speak later today.

As for other precious metals, silver fell 1.7 percent to $ 56.82 an ounce in spot trading, platinum dropped 1.2 percent to $ 1,654.38 , while palladium declined 1.5 percent to $ 1,294.43 .