PRECIOUS-Gold hits three-week low with US-Iran talks, central bank decisions in focus

(Updates prices, adds details as of 0553 GMT)

* Trump unhappy with latest Iran proposal, official says

* Dollar, oil gain on stalled U.S.-Iran peace talks

* Fed expected to hold rates steady on Wednesday

By Noel John

April 28 (Reuters) - Gold fell to a three-week low on Tuesday, as elevated oil prices kept inflation concerns high, while investors awaited key central bank decisions this week to see if the Middle East conflict has altered the interest rate outlook.

Spot gold was down 1.1% at $4,628.88 per ounce, as of 0553 GMT, its lowest level since April 7. U.S. gold futures for June delivery fell 1.1% to $4,643.70. U.S. President Donald Trump is unhappy with the latest Iranian proposal on resolving the two-month war, a U.S. official said, dampening hopes for a resolution to the conflict that has disrupted energy supplies, fuelled inflation, and killed thousands.

"Geopolitical headlines are still the main driver (of gold prices). In the event of a deal (between the U.S. and Iran) or an interim deal, the dollar should weaken, and gold will likely break out to the upside," said Edward Meir, analyst at Marex. The dollar edged higher, and oil prices hovered above $110 a barrel, as the crucial Strait of Hormuz waterway remained largely shut.

Higher crude oil prices can stoke inflation by raising transportation and production costs, increasing the likelihood of higher interest rates. While gold is considered an inflation hedge, high interest rates make yield-bearing assets more attractive, weighing on its appeal.

The U.S. Federal Reserve is widely expected to hold interest rates steady at the end of its two-day meeting on Wednesday.

"The Fed is going to be largely irrelevant. They're not going to be doing anything on rates for now," said Meir, adding that it might cut rates later in the fourth quarter as "we're heading into a global slowdown."

Investors will also be focusing on other central bank decisions this week, including those from the European Central Bank, the Bank of England and the Bank of Canada.

Spot silver fell 3% to $73.23 per ounce, platinum lost 1.5% to $1,953.50, and palladium was down 2.1% at $1,445.50. (Reporting by Noel John in Bengaluru; Editing by Subhranshu Sahu and Harikrishnan Nair)