Gold drops to over one-year low as fading Middle East peace hopes fan inflation fears

* Trump says 'we don't need a deal with Iran'

* Spot gold hits lowest since October 2025

* Dollar near 19-month peak

* US PPI data due on Friday

(Updates prices for US closing hours)

Nov 12 (Reuters) - Gold prices slid 3% on Thursday, extending losses for a third straight session to hit a more-than-one-year low, as oil prices climbed on fading hopes for peace in the Middle East that spurred fears of higher inflation and elevated interest rates.

Spot gold dipped 2.7% to $3,880.93 per ounce by 1:53 p.m. ET (1855 GMT), having touched its lowest level since October 2025 earlier in the session.

US gold futures for December delivery settled 2.9% lower at $3,885.30 per ounce.

US President Donald Trump said on social media that the US did not need a deal with Iran, quashing hopes of a deal to end the conflict.

Oil rose, fanning inflationary concerns and expectations that the US Federal Reserve could keep interest rates higher for longer.

"Higher energy prices continue to warrant a hawkish Fed, and a hawkish Fed is an environment of higher interest rates and hence a headwind for the yellow metal," David Meger, director of metals trading at High Ridge Futures, said.

A hot US inflation reading on Tuesday, hawkish remarks from Fed officials this week and a US dollar rally to a near 19-month high "are working to press the gold market lower," said Jim Wyckoff, a market analyst at American Gold Exchange.

Traders see an 87% chance of a 25-basis-point rate hike in December, while the probability of a larger 50-basis-point move also increased.

Higher interest rates reduce the appeal of non-yielding bullion.

Gold's decline earlier in the session triggered stops on the long positions, established in bullion over the past two weeks, when it was recovering from the previous wave of a slump in tech shares amid worries over AI spending, independent metals trader Tai Wong said.

Nvidia CEO Jensen Huang's exit stirred concerns about the future of the AI heavyweight and could have far-reaching consequences for US chip export policy.

Investors await the US producer price index data due on Friday.

Spot silver fell 3% to $50.12 per ounce after touching its lowest level since November 4 earlier in the session, while spot platinum lost 1.2% to $1,518.49 after hitting its lowest since November 6. Spot palladium dropped 3.1% to $995.91, a day after reaching its highest level since October 22.

(Reporting by Vedika Thorat, Anjana Anil and Polina Devitt; Editing by Vijay Kishore)