Gold prices climbed toward $4,200 per ounce Wednesday, extending gains for a third consecutive session as prospects of an agreement to reopen the Strait of Hormuz eased concerns over energy-driven inflation and further US interest rate hikes.

Spot gold rose around 3% to trade near $4,200 per ounce as of 1310GMT, while silver jumped 4% to approximately $62 per ounce, The Caspian Post reports, citing Anadolu Agency.

The precious metals rally followed reports of progress in negotiations involving the US and Iran over reopening the strategic waterway, through which a significant share of global oil and liquefied natural gas supplies normally passes.

Qatar said Tuesday that an interim proposal had been prepared, while officials in Washington and Tehran indicated that negotiations were advancing.

Reports said the proposal could establish a temporary shipping arrangement while broader disagreements are discussed.

Oil prices fell sharply Tuesday as the developments reduced concerns over prolonged disruptions to Middle Eastern energy supplies.

Lower oil prices could ease inflationary pressures and reduce the need for the US Federal Reserve to raise borrowing costs in the near term, supporting non-yielding assets such as gold and silver.

Markets lowered the probability of a 25-basis-point Fed rate increase in September to around 57%, compared with approximately 67% a day earlier.