PRECIOUS-Gold climbs as oil price drop eases inflation, high rate concerns

* Iran's military rejects Trump's talk of negotiation

* Oil prices drop, dollar eases

* Gold rebounds after touching 4-month low on Monday (Updates prices for Asia closing session)

By Noel John

March 25 (Reuters) - Gold extended gains on Wednesday, buoyed by a softer dollar and as a drop in oil prices eased concerns about inflation pressures and higher global interest rates, even as conflicting signals from the U.S. and Iran to end the war kept investors on edge.

Spot gold was up 1.6% at $4,545.34 per ounce, as of 0751 GMT, after gaining more than 2% earlier in the session. The metal had hit a four-month low of $4,097.99 on Monday.

U.S. gold futures for April delivery jumped 3.3% to $4,545.20.

The dollar eased, making greenback-priced bullion cheaper for holders of other currencies.

"Near-term, gold is likely to stay sensitive to Federal Reserve policy path expectations, USD and geopolitical developments, but the rebound suggests dips may continue to find support unless real yields move meaningfully higher," said Christopher Wong, a strategist at OCBC.

Oil prices fell after U.S. President Donald Trump said on Tuesday that the U.S. was making progress in its efforts to negotiate an end to the war with Iran.

Iran's military on Wednesday, however, rejected Trump's claim that the U.S. was in negotiations to end the war, saying the U.S. is negotiating with itself.

Higher crude prices have fueled inflation worries and expectations of higher interest rates. Although rising inflation typically boosts gold's appeal as a hedge, high interest rates weigh on demand for the non-yielding asset.

Investors have trimmed bets on U.S. Federal Reserve rate hikes by December to around 16% from 25% on Friday, according to CME Group's FedWatch.

"Despite gold prices trading ~17% below pre-conflict levels amid USD strength and broad-based de-risking, this flush has historically been a tactical dip to buy, and the bullish case strengthens the longer the conflict persists," JP Morgan said in a note.

Spot silver rose 2.6% to $73.08 per ounce. Spot platinum gained 0.9% to $1,951.35 and palladium was up 1.5% at $1,460.60. (Reporting by Noel John in Bengaluru; additional reporting by Pablo Sinha and Swati Verma; Editing by Rashmi Aich, Mrigank Dhaniwala and Subhranshu Sahu)