* Spot gold scaled highest level since June 5 earlier

* Crude oil, 10-year US Treasury yields at over one-week

high

* US CPI report due on Wednesday, PPI data on Thursday

* Trump demands Iranian reparations

(Updates for EMEA morning session)

By Pablo Sinha

Aug 11 (Reuters) - Gold prices fell on Tuesday after hitting

a more than two-month high earlier in the session, as fading

hopes for a U.S.-Iran peace deal lifted oil prices and fuelled

concerns that inflation and interest rates could remain

elevated.

Spot gold was down 0.4% to $4,371.92 per ounce by

0855 GMT, after hitting its highest level since June 5 earlier

at $4,434.84.

U.S. gold futures rose 0.3% to $4,430.80.

Yields on the benchmark 10-year U.S. Treasury note

rose to an over one-week high, increasing the

opportunity cost of holding bullion.

"The rise in oil prices has provided a boost to U.S.

Treasury yields, which is weighing on gold prices," said Hamad

Hussain, a climate and commodities economist at Capital

Economics.

Oil prices rose after U.S. President Donald Trump responded to

Iran's conditions for a peace deal by demanding that Tehran pay

compensation for people killed in wars, attacks and protests.

The comments added to uncertainty over efforts to reopen the

Strait of Hormuz.

Higher oil prices could add to inflation pressures and keep

interest rates elevated, making non-yielding gold less

attractive.

Traders are currently pricing a 52% chance of an

interest-rate hike in September, up from 44% on Monday,

according to the CME FedWatch Tool.

Cleveland Federal Reserve Bank President Beth Hammack said on

Monday she believed the time was right to begin raising interest

rates gradually so as to avoid the need for sharper increases

later.

Investors are now awaiting U.S. consumer price data due on

Wednesday and producer price data on Thursday for further clues

on the Fed's policy outlook.

"A hotter-than-expected inflation print could justify the

case for an interest rate hike at the Fed's next meeting and, as

a result, put further downward pressure on gold prices," Hussain

added.

Among other metals, spot silver fell 1.5% to $64.74,

platinum gained 0.4% to $1,760.15 and palladium

declined 0.4% to $1,377.81.