Precious-Gold gains as US dollar declines, hopes of Mideast deal hit oil

Spot silver XAG= gained 0.2% to $57.77, while platinum XPT= lost 0.7% to $1,630.78, and palladium XPD= fell 0.8% to $1,263.20.

Aug. 3 (Reuters) - Gold prices gained on Monday as the dollar weakened and optimism over a possible U.S.-Iran agreement sent oil prices sharply lower, tempering inflation fears and expectations of prolonged high interest rates.

Spot gold XAU= was up 0.3% at $4,052.96 per ounce, as of 1221 GMT. U.S. gold futures GCcv1 edged 0.2% higher to $4,051.70. The precious metal posted its first monthly rise in five in July, rising about 1%.

Oil prices slumped more than $4 a barrel, after U.S. President Donald Trump held off a fresh attack on Iran as he sought a quick deal that would halt Tehran's nuclear ambitions and reopen the Strait of Hormuz.

Trump said that talks with Iran will happen on Monday but declined to set a deadline for an agreement, although Iran said there were no talks under way with the United States.

"We are back to the previous correlation, with gold rising when crude oil falls, and gold falling when oil rises... The lower oil price is today reducing modestly U.S. rate hike expectations for this year, and supporting gold," UBS analyst Giovanni Staunovo said.

Elevated oil prices stoke concerns around inflation and higher interest rates, diminishing bullion's appeal as a non-yielding asset.

Further supporting gold, the U.S. dollar came under pressure, hitting its lowest since mid-June, after authorities intervened in the foreign exchange market to support the yen, while yields on the benchmark 10-year U.S. Treasury note also fell.

Also in focus is a set of U.S. jobs reports due this week, including the ADP employment report, and nonfarm payrolls data.