Gold prices rose for the third consecutive session on Thursday, touching a two-week high, as hopes for a U.S.-Iran peace agreement eased some inflation concerns, while a weaker dollar also aided demand.

Spot gold rose 0.9% $4,734.28 an ounce by 06:18 ET (10:18 GMT). Gold futures for June advanced 1.0% to $4,742.90 an ounce.

The yellow metal climbed more than 3% on Wednesday -- its biggest daily gain since late March -- as oil prices tumbled sharply on expectations that tensions in the Middle East could ease.

"The market is now pausing as traders wait for further clarity on the diplomatic track between the U.S. and Iran, with Tehran reviewing a new proposal that could outline a path toward reopening the Strait of Hormuz," said Neil Welsh, Head of Metals at Britannia Global Markets, in a note.

U.S.-Iran peace deal prospects in focus

Iran is reportedly reviewing a fresh U.S. proposal to end their more than two-month old war, even as President Donald Trump has maintained a threat to once again launch attacks should a deal fail to materialize.

Washington and Tehran have reportedly been working with mediators on a one-page, 14-point framework to restart talks over a lasting peace deal. The discussions are anticipated to kick off next week in Pakistan, according to the Wall Street Journal.

The paper added that a monthlong process would then look to resolve disputes over Iran’s nuclear ambitions and relief from sanctions, although key disagreements remain over areas like nuclear enrichment and inspections.

Trump suggested in remarks at the White House on Wednesday afternoon that the U.S. had "won" the war and that talks with Tehran had been "very good" over the last 24 hours.

According to CNN, Iran is anticipated to give mediators their response to the U.S. proposal by Thursday.

Oil prices fell after tumbling in the previous session, although crude remains well above pre-war levels. An energy shock sparked by the closure of the Strait of Hormuz, a vital waterway off Iran’s southern coast for a fifth of the world’s oil, has, in turn, fueled worries over a spike in inflationary pressures around the world. Expectations have subsequently grown that central banks -- especially the Federal Reserve -- could react by raising interest rates, a trend which may not bode well for non-yielding assets like gold.

"The potential easing in energy prices gives the Fed more room to cut rates, which is positive for gold," ING analysts said in a note.

But the prospect of lower energy prices helped reduce some fears of prolonged inflation, dragging down U.S. Treasury yields and boosting the appeal of bullion. 

Meanwhile, a softer U.S. dollar has also burnished gold, making it less expensive for overseas buyers. The greenback has become a relative safe-haven during the Iran conflict, thanks partially to the view among many traders that the American economy, as a major energy exporter, may be broadly immune to higher oil prices. Signs of detente, as a result,  have hit the dollar and led investors back into risk assets.

Markets are now awaiting Friday’s U.S. non-farm payrolls report for further clues on the Fed’s interest-rate path. While recent comments from Fed officials have highlighted concerns that the Middle East conflict could fuel inflation and disrupt supply chains, employment -- the other central pillar of the Fed’s mandate -- has remained broadly resilient.