Updates prices, adds fresh comments

By Ashitha Shivaprasad

May 28 (Reuters) - Gold prices reversed course to rise on Thursday, rebounding from a two‑month low hit earlier in the session, as the U.S. dollar and oil prices eased following a report that said the United States and Iran were working to extend a ceasefire.

Spot gold XAU= was up 0.5% at $4,477.59 per ounce by 11:08 a.m. EDT (1508 GMT), after falling to its lowest level since late March earlier.

U.S. gold futures GCcv1 rose 0.6% to $4,475.60.

Axios reported that the U.S. and Iran reached an outline agreement to extend their ceasefire, pending the approval of President Donald Trump.

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

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 remained 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.

"The problem for gold is that geopolitical instability is no longer operating in isolation. Higher energy prices are once again feeding into inflation concerns, pushing Treasury yields modestly higher and strengthening the dollar at the same time," said Fawad Razaqzada, market analyst at City Index. USD/ US/ [O/R]

Spot silver XAG= gained 0.3% to $74.8 and platinum XPT= lost 0.8% to $1,902.64. Palladium XPD= slipped 1.9% to $1,364.10.