Updates prices, adds fresh analyst comments

By Ashitha Shivaprasad

May 11 (Reuters) - Gold prices reversed course to edge up on Monday in volatile trading, as investors assessed developments in U.S.-Iran diplomacy and awaited key U.S. inflation data due later this week.

Spot gold XAU= was up 0.3% at $4,730.49 per ounce, as of 10:20 a.m. EDT (1420 GMT) after falling over 1% earlier in the session.

U.S. gold futures GCcv1 rose 0.2% to $4,740.40.

"There is just some bargain hunting coming in and positioning ahead of the U.S. inflation data this week," said Jim Wyckoff, market analyst at American Gold Exchange.

Focus will be on the U.S. Consumer Price Index (CPI) due on Tuesday and the Producer Price Index (PPI) scheduled for release on Wednesday.

On the geopolitical front, President Donald Trump's swift rejection of Iran's response to a U.S. peace proposal has fuelled concerns that the 10-week-old conflict will drag on and continue to paralyse shipping through the Strait of Hormuz, pushing oil prices higher. O/R

Markets are largely focused on expectations around the strait, particularly whether it will reopen, and appear to be digesting the broader scenario of higher energy prices, said Daniel Pavilonis, senior market strategist at RJO Futures.

Global brokerages have scaled back expectations of two U.S. interest rate cuts this year, with forecasts now split between some easing and no cuts at all in 2026 amid inflation risks and cautious policymakers.

Gold tends to come under pressure despite its safe-haven appeal, as higher rates increase the opportunity cost of holding non-yielding assets.

Markets are also watching Trump’s two-day visit to China this week, where he is set to meet Chinese President Xi Jinping to discuss Iran, Taiwan, artificial intelligence and nuclear weapons.

Elsewhere, shares of Indian jewellery retailers tumbled after Prime Minister Narendra Modi urged people to refrain from buying gold for a year to protect foreign exchange reserves. India is the second-largest gold consumer.

Among other metals, spot silver XAG= was up 5.8% at $84.99 per ounce, platinum XPT= gained 2.6% to $2,108.80, and palladium XPD= was up 1% at $1,506.50.