PRECIOUS-Gold climbs as oil price drop eases inflation, high rate concerns

By Noel John

March 25 (Reuters) - Gold extended gains on Wednesday, buoyed by a softer dollar and as a drop in oil prices eased concerns about inflation pressures and higher global interest rates, even as conflicting signals from the U.S. and Iran to end the war kept investors on edge.

Spot gold XAU= was up 1.6% at $4,545.34 per ounce, as of 0751 GMT, after gaining more than 2% earlier in the session. The metal had hit a four-month low of $4,097.99 on Monday.

U.S. gold futures GCcv1 for April delivery jumped 3.3% to $4,545.20.

The dollar eased, making greenback-priced bullion cheaper for holders of other currencies. USD/

"Near-term, gold is likely to stay sensitive to Federal Reserve policy path expectations, USD and geopolitical developments, but the rebound suggests dips may continue to find support unless real yields move meaningfully higher," said Christopher Wong, a strategist at OCBC.

Oil prices fell after U.S. President Donald Trump said on Tuesday that the U.S. was making progress in its efforts to negotiate an end to the war with Iran.

Iran's military on Wednesday, however, rejected Trump's claim that the U.S. was in negotiations to end the war, saying the U.S. is negotiating with itself.

Higher crude prices have fueled inflation worries and expectations of higher interest rates. Although rising inflation typically boosts gold's appeal as a hedge, high interest rates weigh on demand for the non-yielding asset.

"Despite gold prices trading ~17% below pre-conflict levels amid USD strength and broad-based de-risking, this flush has historically been a tactical dip to buy, and the bullish case strengthens the longer the conflict persists," JP Morgan said in a note.

Spot silver XAG= rose 2.6% to $73.08 per ounce. Spot platinum XPT= gained 0.9% to $1,951.35 and palladium XPD= was up 1.5% at $1,460.60.