PRECIOUS-Gold falls as inflation concerns fuel higher rate expectations

By Anjana Anil

May 1 (Reuters) - Gold fell on Friday and was headed for a weekly loss as inflation concerns reinforced higher-for-longer rate expectations, with oil prices holding near $110 a barrel.

Spot gold XAU= was down 0.7% at $4,588.32 per ounce at 9:30 a.m. ET (1330 GMT) after falling to as low as $4,559.48 earlier in the session. It was on track for a weekly loss of 2.3%.

U.S. gold futures GCcv1 for June delivery fell 0.6% to $4,600.00.

"Precious metal traders continue to sell gold after the Fed signalled U.S. interest rates would remain on hold for the near term due to inflation concerns," said Chris Gaffney, president of world markets at EverBank.

This downward trend in gold could continue in the near term as these concerns persist, with oil prices remaining elevated, he added.

Brent prices headed for a weekly gain, and continued to stoke fears of a global economic slowdown and surging inflation as fuel prices climb.

Increasing costs could encourage central banks to hold interest rates higher for longer, which would pressure non-yielding assets like gold as investors turn to alternate options like Treasury yields that offer better returns.

The U.S. Federal Reserve kept interest rates unchanged this week and adopted a hawkish tone that saw markets give up on any hope for a rate cut there this year. FEDWATCH

Bullion prices have fallen since the start of the Iran conflict in late February, even though the metal is considered a hedge against geopolitical uncertainty.

In the Middle East, Iran sent its latest proposal for negotiations with the United States to Pakistani mediators on Thursday, state news agency IRNA reported.

Among other precious metals, spot silver prices XAG= rose 1.4% to $74.78 per ounce.

"Long-term outlook (for silver) remains supported by a sixth consecutive annual market deficit, shrinking above-ground inventories and firm demand from solar and private investors," wrote Ole Hansen, head of commodity strategy at Saxo Bank.

Platinum XPT= was up 0.3% at $1,991.80, and palladium XPD= lost 0.1% to $1,522.25.