* Crude oil prices edge down from 3% high earlier

* Dollar pares gains, yields reverse course to trade 0.2%

down

* Traders now see 58% chance of at least one rate hike by

2026-end

(Updates for market close)

By Ishaan Arora

May 21 (Reuters) - Gold prices steadied on Thursday

after hitting a 1% low earlier, as oil prices fell on

uncertainty over a resolution to the U.S.-Israeli war on Iran,

with a softer dollar and lower yields supporting bullion.

Spot gold was up 0.1% at $4,547.54 per ounce as of

02:04 a.m. ET (1804 GMT), after falling as much as 1% earlier in

the session.

U.S. gold futures for June delivery settled 0.1%

lower at $4,542.50.

Oil prices whipsawed in a volatile trading session, trading

lower on uncertain prospects for a resolution in the

U.S.-Israeli war with Iran.

"So oil (is) down and the dollar retreating from a six-week

high should bode well for gold in the short term here and it has

firmed. I expect the trade's probably going to be a bit cautious

here initially. We've seen agreements sort of fall apart," said

Peter Grant, vice president and senior metals strategist at

Zaner Metals.

The yellow metal has fallen more than 14% since the war

started in late February, which has disrupted maritime traffic

through the Strait of Hormuz, lifting energy prices and stoking

inflation concerns.

The dollar pared earlier gains, making

greenback-priced bullion more cheaper for other

currency-holders, while the U.S. 10-year Treasury bond yields

fell 0.2%, decreasing the opportunity cost of holding

non-yielding bullion.

"Increasing oil prices, which push inflation higher, are

putting pressure on central banks to keep rates unchanged or

potentially even increase them. This, thus remains a headwind

for gold in the near term," UBS analyst Giovanni Staunovo added.

Despite being seen as an inflation hedge, gold tends to

struggle in periods of elevated interest rates.

Traders now see a 58% chance of at least one 25-basis-point

interest rate hike by the U.S. Federal Reserve this year,

compared with 48% a day earlier, as per CME's FedWatch Tool.

Spot silver rose 0.9% to $76.63 per ounce, platinum

gained 0.6% to $1,962 and palladium added 1.1% to

$1,384.50.