* Iran rejects de-escalation offers

* Israel's Katz says Iran's security chief killed

* Oil prices jump more than 1%

(Updates prices)

By Ashitha Shivaprasad

March 17 (Reuters) - Gold prices held nearly steady on Tuesday, as market participants

monitored the intensifying Iran conflict and awaited the U.S. Federal Reserve's upcoming policy

decision.

Spot gold was little changed at $5,003.11 per ounce by 12:25 p.m. ET (1625 GMT). U.S.

gold futures for April delivery rose 0.1% to $5,007.70.

The gold market reflected "a balancing act" between safe-haven demand on heightened

geopolitical uncertainty and bearish pressures from inflation, said Jim Wyckoff, senior analyst

at Kitco Metals. "I think gold will probably make new record highs, but I suspect it won't be

anytime soon. I think the bulls have just run out of gas," he added.

Bullion is considered a safe asset during periods of uncertainty and inflation, but becomes

less attractive in a high-rate environment as it yields no interest.

The U.S.-Israeli war on Iran, now in its third week, has led to severe disruption of energy

trade and stoked fears of a spike in inflation.

Israel claimed on Tuesday it killed Iran's security chief, while a senior Iranian official

said the new supreme leader had rejected de-escalation offers conveyed by intermediaries,

demanding Israel and the U.S. first be "brought to their knees."

International oil prices rose more than 1% for the day.

The U.S. Federal Reserve is expected to announce its decision on interest rates on Wednesday

and investors expect the central bank will keep rates steady.

Commerzbank, in a note, said that the Fed meeting is unlikely to provide impetus to gold, as

uncertainty surrounding the duration of the war and the disruption to oil supplies is likely to

make the Fed cautious.

Among other metals, spot silver fell 1.9% to $79.2 per ounce, after falling 3%

earlier in the session, while platinum gained 0.5% to $2,125.10 and palladium rose

0.9% to $1,612.09.