Updates prices

By Ashitha Shivaprasad

May 28 (Reuters) - Gold prices reversed course to gain over 1% on Thursday, rebounding from a two-month low hit earlier in the session, as the U.S. dollar and oil prices eased following news that the U.S. and Iran had reached a ceasefire extension agreement.

Spot gold XAU= was up 1.1% at $4,504.07 per ounce by 1:31 p.m. EDT (1731 GMT), after falling to its lowest level since late March.

U.S. gold futures GCcv1 settled 1.1% higher at $4,532.40.

The U.S. and Iran reached a memorandum of understanding on a 60-day ceasefire extension, which U.S. President Donald Trump must still approve, according to a source familiar with the matter.

The U.S. dollar index .DXY was down 0.2%, making greenback-priced bullion cheaper for overseas buyers. Brent prices eased after the report. USD/ O/R

Meanwhile, data showed that the U.S. personal consumption expenditures price index jumped 3.8% in the 12 months through April, in line with expectations. The PCE price index rose 0.4% month-on-month in April after shooting up 0.7% in March.

"The trading gods seem to be intervening in gold today. First, the weak PCE, and now reports of an imminent deal that would open Hormuz, are giving gold a much-needed reprieve," independent metals trader Tai Wong said.

"Gold was threatening to drop below the 200 day-moving-average early this morning — which many traders and investors consider a critical litmus test for maintaining an uptrend."

The PCE data suggests that the Federal Reserve may hold rates rather than pursue further tightening, said Bart Melek, global head of commodity strategy at TD Securities.

Minutes of the Fed's April 28-29 meeting published last week showed a growing number of officials open to the possibility that they may need to raise rates. FEDWATCH

Bullion has come under pressure since the onset of the U.S.-Israeli conflict with Iran in late February amid inflation concerns. Despite its safe-haven appeal, bullion underperforms when interest rates rise, as investors gravitate toward yield-bearing assets.

Elsewhere, China's net gold imports via Hong Kong rose 81.2% in April from the previous month, data showed.

Spot silver XAG= gained 1.3% to $75.60 and platinum XPT= steadied at $1,918.95. Palladium XPD= slipped 1.4% to $1,371.52.