* US plan for ending war 'one-sided', senior Iranian

official says

* US weekly jobless claims increase slightly

* Silver, palladium down 5%

(Updates prices)

By Ashitha Shivaprasad

March 26 (Reuters) - Gold prices retreated on Thursday,

hurt by a firmer dollar and higher oil prices that kept

inflation fears intact and sustained expectations of elevated

interest rates, while market participants reconsidered the

chances of a Middle East ceasefire.

Spot gold was down 2.7% at $4,384.38 per ounce by

1:30 p.m. ET (1730 GMT). U.S. gold futures for April

delivery settled 3.9% lower at $4,376.3.

The U.S. dollar nudged higher, making greenback-priced

bullion more expensive for other currency holders.

Gold is weighed down by concerns over higher interest rates

and inflation, said Jim Wyckoff, senior analyst at Kitco Metals.

"If the conflict continues, prices could dip below $4,000,

while a ceasefire and renewed rate-cut hopes could lift them

back toward $5,000," he said.

Despite being a hedge against uncertainty and inflation,

gold often loses appeal in a higher rate environment as rising

yields raise the opportunity cost of holding the metal.

Oil rose as prospects for a prolonged conflict in the Middle

East stoked concerns over further supply disruptions. Higher

energy prices could exacerbate inflationary pressures across

economies.

A U.S. proposal for ending nearly four weeks of fighting is

"one-sided and unfair", a senior Iranian official told Reuters.

Meanwhile, U.S. President Donald Trump said Iran was letting

10 oil tankers transit the Strait of Hormuz as an apparent

goodwill gesture in negotiations.

Gold prices have fallen 17% since the U.S.-Israeli war on

Iran began on February 28.

"Speculative movements in recent quarters have compromised

the ability of gold and silver to effectively serve as

safe-haven assets, at least in the short term. The quest for

liquidity has fuelled sales of both metals in the first weeks of

the conflict," said analysts at Intesa Sanpaolo in a quarterly

note.

Elsewhere, data showed that new applications for U.S.

unemployment benefits rose slightly last week, suggesting the

labor market remains stable and giving the Federal Reserve scope

to hold interest rates steady while monitoring inflation risks

linked to the war.

Among other metals, spot silver fell 5% to $67.71,

platinum was down 4.2% at $1,839.67, and palladium

shed 5% to $1,352.82.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Nia

Williams and Devika Syamnath)