May 1 (Reuters) - Gold rose on Friday, reversing earlier losses of more than 1%, on hopes for a breakthrough to end the Iran war after Tehran reportedly submitted a new proposal for negotiations, easing some inflation concerns.
Spot gold was up 0.3% to $4,636.72 per ounce at 10:36 a.m. ET (1436 GMT) after falling to as low as $4,559.48 earlier in the session. It was still on track for a weekly loss of 1.6%.
U.S. gold futures for June delivery were up 0.4% to $4,649.60.
"The potential peace breakthrough, with Iran signalling that it wants to talk again, probably boosted investor risk appetite, pressured the U.S. dollar index and pushed the gold market higher," said Jim Wyckoff, senior analyst at Kitco Metals.
The dollar (.DXY), was down 0.3% against its peers, making greenback-priced bullion cheaper for buyers holding other currencies.
Iran sent its latest proposal for negotiations with the U.S. to Pakistani mediators on Thursday, Iranian state news agency IRNA reported.
Oil prices dropped on the news, though they remained on track for weekly gains, continuing to fuel concerns about a global economic slowdown and surging inflation as fuel prices climb.
Rising costs could prompt central banks to keep interest rates higher for longer, weighing on non-yielding assets such as gold as investors turn to alternatives like Treasury yields.
The U.S. Federal Reserve kept interest rates unchanged this week and struck a hawkish tone that saw markets abandon expectations for a rate cut this year.
Bullion prices have fallen since the start of the Iran conflict in late February, despite the metal's traditional role as a hedge against geopolitical uncertainty.
Among other precious metals, spot silver prices rose 3.4% to $76.26 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 was up 0.8% at $2,002, and palladium added 0.9% to $1,537.12.
Reporting by Anjana Anil in Bengaluru. Editing by Nia Williams and Mark Potter
