* Brent prices headed for a weekly gain

* Iran sends proposal for negotiations to mediator

Pakistan

* U.S. dollar down against peers

(Rewrites after prices turn positive)

By Anjana Anil

May 1 (Reuters) - Gold rose on Friday, reversing earlier

losses of more than 1%, on hopes for a breakthrough to end the

Iran war after Tehran reportedly submitted a new proposal for

negotiations, easing some inflation concerns.

Spot gold was up 0.3% to $4,636.72 per ounce at 10:36

a.m. ET (1436 GMT) after falling to as low as $4,559.48 earlier

in the session. It was still on track for a weekly loss of 1.6%.

U.S. gold futures for June delivery were up 0.4% to

$4,649.60.

"The potential peace breakthrough, with Iran signalling that

it wants to talk again, probably boosted investor risk appetite,

pressured the U.S. dollar index and pushed the gold market

higher," said Jim Wyckoff, senior analyst at Kitco Metals.

The dollar was down 0.3% against its peers, making

greenback-priced bullion cheaper for buyers holding other

currencies.

Iran sent its latest proposal for negotiations with the U.S.

to Pakistani mediators on Thursday, Iranian state news agency

IRNA reported.

Oil prices dropped on the news, though they remained on

track for weekly gains, continuing to fuel concerns about a

global economic slowdown and surging inflation as fuel prices

climb.

Rising costs could prompt central banks to keep interest

rates higher for longer, weighing on non-yielding assets such as

gold as investors turn to alternatives like Treasury yields.

The U.S. Federal Reserve kept interest rates unchanged this

week and struck a hawkish tone that saw markets abandon

expectations for a rate cut this year.

Bullion prices have fallen since the start of the Iran

conflict in late February, despite the metal's traditional role

as a hedge against geopolitical uncertainty.

Among other precious metals, spot silver prices rose

3.4% to $76.26 per ounce.

"Long-term outlook (for silver) remains supported by a sixth

consecutive annual market deficit, shrinking above-ground

inventories and firm demand from solar and private investors,"

wrote Ole Hansen, head of commodity strategy at Saxo Bank.

Platinum was up 0.8% at $2,002, and palladium

added 0.9% to $1,537.12.