PRECIOUS-Gold edges down with US-Iran talks, central bank decisions in focus

By Noel John

April 28 (Reuters) - Gold prices eased on Tuesday, as investors watched for the impact of the Middle East conflict and stalled U.S.-Iran peace talks on the interest rate outlook of key central banks that meet this week.

Spot gold XAU= was down 0.2% at $4,670.89 per ounce, as of 0350 GMT. U.S. gold futures GCcv1 for June delivery fell 0.2% to $4,684.70.

U.S. President Donald Trump is unhappy with the latest Iranian proposal on resolving the two-month war, a U.S. official said, dampening hopes for a resolution to the conflict that has disrupted energy supplies, fuelled inflation, and killed thousands.

"Geopolitical headlines are still the main driver (of gold prices). In the event of a deal (between the U.S. and Iran) or an interim deal, the dollar should weaken, and gold will likely break out to the upside," said Edward Meir, analyst at Marex.

The dollar edged higher, and oil prices hovered above $109 a barrel, as the crucial Strait of Hormuz waterway remained largely shut. USD/ O/R

Higher crude oil prices can stoke inflation by raising transportation and production costs, increasing the likelihood of higher interest rates. While gold is considered an inflation hedge, high interest rates make yield-bearing assets more attractive, weighing on its appeal.

The U.S. Federal Reserve is widely expected to hold interest rates steady at the end of its two-day meeting on Wednesday.

"The Fed is going to be largely irrelevant. They're not going to be doing anything on rates for now," said Meir, adding that it might cut rates later in the fourth quarter as "we're heading into a global slowdown."

Investors will also be focusing on other central bank decisions this week, including those from the European Central Bank, the Bank of England and the Bank of Canada.

Spot silver XAG= fell 1.2% to $74.61 per ounce, platinum XPT= was steady at $1,984.19, and palladium XPD= was down 0.9% at $1,463.