Updates for US morning hours

By Ashitha Shivaprasad

May 29 (Reuters) - Gold rose for a second straight session on Friday after news the U.S. and Iran may have agreed to extend their ceasefire, though prices were still headed for a monthly decline as inflation concerns and expectations of higher interest rates weighed.

Spot gold XAU= was up 0.6% to $4,519.64 per ounce at 8:52 a.m. EDT (1252 GMT). Prices fell to a two-month low of $4,365.76 on Thursday, but closed higher.

U.S. gold futures GCcv1 for August delivery rose 0.4% to $4,550.00.

Four sources familiar with the matter said the proposed U.S-Iran deal would extend their truce by 60 days and lift restrictions on shipping through the Strait of Hormuz. U.S. President Donald Trump has yet to approve the agreement, and Iranian state media said it has not been finalised.

Gold bounced from a key technical support level, while optimism over the ceasefire extension pushed oil prices and the dollar lower - both supportive for bullion, said Phillip Streible, chief market strategist at Blue Line Futures.

The dollar index .DXY was on track for a weekly decline, making dollar-denominated metals cheaper for overseas buyers, while oil prices were also set for a weekly fall. USD/ O/R

Still, the “higher-for-longer” interest-rate theme remains intact, Streible said, as disruptions to shipping and energy infrastructure could keep oil prices elevated and the Federal Reserve cautious.

Data showed U.S. inflation rose at its fastest pace in three years in April, driven by higher energy prices linked to the Iran war, reinforcing expectations the Fed will keep rates unchanged well into next year.

Higher interest rates increase the opportunity cost of holding non-yielding gold. Spot gold was down more than 2% for the month.

Elsewhere, gold demand in India remained subdued due to higher prices and import duties, while premiums in top consumer China narrowed amid cautious sentiment. GOL/AS

Spot silver XAG= fell 0.2% to $75.51 per ounce and was headed for monthly gain, while platinum XPT= steadied at $1,923.55. Palladium XPD= gained 0.6% to $1,375.57, but was down more than 9% for the month.