PRECIOUS-Gold falls on oil-driven inflation fears as Trump rejects Iran peace proposal

By Noel John

May 11 (Reuters) - Gold fell 1% on Monday, as elevated oil prices stoked worries over inflation and prolonged high interest rates, while peace talks between the United States and Iran remained unsolved.

Spot gold XAU= fell 1% at $4,667.99 per ounce, as of 0852 GMT. U.S. gold futures GCcv1 for June delivery lost 1.1% at $4,677.80.

The dollar rose, making greenback-priced bullion more expensive for holders of other currencies. USD/

U.S. President Donald Trump on Sunday rejected Iran's response to a U.S. proposal for peace talks to end the war, saying Tehran's demands were "totally unacceptable."

Brent crude oil prices rose above $103 a barrel amid concerns the 10-week-old conflict will drag on, keeping shipping through the Strait of Hormuz paralyzed. O/R

"Inflation risks still weigh heavy on the market's collective mind, as attempts to end the Middle East conflict reached an impasse after the U.S. and Iran rejected each other's peace proposals," said Han Tan, chief market analyst at Bybit.

Gold prices have fallen more than 11% since the war began in late February, pressured by higher oil prices. Elevated crude oil prices can stoke inflation, increasing the likelihood of higher interest rates. While gold is seen as an inflation hedge, high rates tend to weigh on the non-yielding asset.

Investors will eye Trump's meeting with Chinese President Xi Jinping on Wednesday as the Gulf will be on the agenda.

They will also looking out for April's U.S. Consumer Price Index data on Tuesday, for further clues on the Fed's monetary policy direction.

"Gold may face greater downward pressure should tomorrow's U.S. CPI prints come in hotter than expected, in turn forcing the Fed to keep its benchmark rates elevated for a longer period of time," Tan said.

Spot silver XAG= was steady at $80.34 per ounce, platinum XPT= slid 1.6% to $2,022.93, and palladium XPD= was down 1.1% at $1,475.55.