PRECIOUS-Gold drops more than 1% as markets assess Mideast ceasefire prospects
By Noel John
March 26 (Reuters) - Gold prices fell on Thursday, weighed down by increased expectations of U.S. Federal Reserve rate hikes this year as elevated oil prices stoked inflation worries, with investors awaiting clarity on Middle East de-escalation efforts.
Spot gold XAU= fell 1.2% to $4,451.47 per ounce by 0811 GMT. U.S. gold futures GCcv1 for April delivery lost 2.3% to $4,448.
"You're seeing an acceleration of the idea that... this war will mean inflation and inflation will mean a response from central banks, which will mean higher interest rates," said Ilya Spivak, head of global macro at Tastylive.
Brent crude futures LCOc1 climbed back above $100 a barrel on concerns that protracted fighting in the Middle East will further disrupt energy flows. O/R
Higher crude prices tend to fuel inflation, and while rising inflation typically boosts gold's appeal as a hedge, high interest rates weigh on demand for the non-yielding asset.
U.S. President Donald Trump said Iran was desperate to make a deal to end nearly four weeks of fighting, contradicting the Iranian foreign minister who said his country was reviewing a U.S. proposal but had no intention of holding talks to wind down the conflict.
"In the next 24 to 48 hours, (gold prices) will just be about reacting to headlines about negotiations," said Kyle Rodda, a senior financial market analyst at Capital.com.
"The really big moves will happen probably at the start of next week when it becomes clearer whether the U.S. launches a ground invasion in Iran over the weekend."
Trump has vowed to hit Iran harder if Tehran fails to accept that the country has been "defeated militarily", White House press secretary Karoline Leavitt said on Wednesday.
Spot silver XAG= fell 2.7% to $69.36 per ounce. Spot platinum XPT= was down 2.3% at $1,874.90, while palladium XPD= dropped 2.5% to $1,387.53.
