* Trump says great progress made towards deal with Iran

* Gold hits highest since April 27; silver since April 23

* Dollar, oil drop as Trump indicates possible Iran peace

deal

* April ADP employment report due at 1215 GMT

(Updates for EMEA morning session)

By Pablo Sinha

May 6 (Reuters) - Gold prices climbed over 3% on

Wednesday to hit their highest in over a week, as prospects of a

U.S.-Iran peace deal dragged down the dollar and oil prices,

alleviating inflationary pressures that had underpinned bets on

higher-for-longer interest rates.

Spot gold jumped 3.2% to $4,703.09 per ounce, as of

0938 GMT, its highest since April 27. U.S. gold futures

for June delivery rose 3.2% to $4,714.

Iran will only accept "a fair and comprehensive agreement"

in its negotiations with the U.S. on ending the war, its foreign

minister said on Wednesday, as U.S. President Donald Trump cited

"great progress" in the process.

Trump said on Tuesday he would briefly pause an operation

to help escort ships through the Strait of Hormuz.

"A timely peace deal allowing the normalisation of shipping

through the Strait of Hormuz would alleviate inflationary

pressures and create the conditions for the Federal Reserve to

cut rates in 2026," said ActivTrades analyst Ricardo

Evangelista.

"In a scenario of normalisation in the Persian Gulf, gold

prices may regain some bullish momentum as the dollar weakens

and yields soften. Such a scenario could allow the precious

metal to revisit levels above $5,000 and approach $5,500 by

year-end," Evangelista added.

Stocks leapt globally as oil prices fell on expectations

that bottled-up supply from the key Middle East producing region

could resume flowing.

Elevated oil prices can fan inflation and raise the prospect

of higher interest rates, which tends to undermine gold's appeal

as yield-bearing assets become more attractive.

The dollar fell, making greenback-priced bullion more

affordable for holders of other currencies.

Investors are now looking out for U.S. private payrolls

data, due later in the day, and non-farm payrolls later this

week, to assess the U.S. Fed's monetary policy path.

Spot silver rose 5.7% to $76.95 per ounce, platinum

gained 3.4% to $2,020.05 and palladium was up 3.3%

at $1,534.42.