(Updates for US morning hours)

* U.S. consumer prices increase further in April

* U.S. PPI data due on Wednesday

* Indian banks resume bullion imports after month-long

halt

By Ashitha Shivaprasad

May 12 (Reuters) - Gold prices were under pressure on

Tuesday as fading hopes for an Iran peace deal pushed oil prices

higher, adding to concerns about inflation and the prospect of

higher global interest rates.

Spot gold fell 1% to $4,685.99 per ounce by 1320 GMT.

U.S. gold futures lost 0.7% to $4,693.90.

"Higher oil prices are raising the risk that the U.S.

central bank and others might have to increase interest rates to

fight what would surely emerge as stagflation. So gold is

responding to that," said Bart Melek, global head of commodity

strategy at TD Securities.

Oil prices rose over 3% as hopes for a peace deal on Iran faded

after U.S. President Donald Trump said a ceasefire with Iran was

"on life support" as Tehran rejected a U.S. proposal to end the

conflict.

Data showed that U.S. consumer prices rose for a second straight

month in April, resulting in the largest annual increase in

inflation in nearly three years and further bolstering

expectations the Federal Reserve would keep interest rates

unchanged for a while.

Although gold is considered a hedge against inflation,

higher rates often put pressure on the non-yielding asset.

Joni Teves, precious metals strategist at UBS Investment

Bank, said they are maintaining a bullish outlook on gold as

underlying drivers remain intact.

"We still think prices can recover from current levels and

continue to make new highs this year," she added.

Focus is also on the Producer Price Index (PPI) scheduled for

release on Wednesday and a meeting between Trump and Chinese

President Xi Jinping in Beijing, scheduled to run from Thursday

to Friday.

Spot silver fell 2.4% to $84.06 after hitting a

two-month high earlier.

Silver prices jumped on expectations of a widening deficit

as demand for physical silver grows, analysts at SP Angel said

in a note. They added that higher oil prices are driving

increased EV sales, which in turn is likely to boost demand for

silver in solar and other renewable energy technologies.

Elsewhere, Indian banks have resumed gold and silver imports

after a hiatus that stretched for more than a month by agreeing

to pay a 3% customs levy that earlier prompted lenders to halt

shipments, sources told Reuters.

Platinum eased 1.7% to $2,096.19, and palladium

was down 2.4% at $1,473.00.