PRECIOUS-Gold drops to 2-1/2-year lows as dollar extends rally, yields firm

Reuters

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 (Updates prices)

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      Precious metals set for weekly falls
    

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      U.S. dollar hits 20-year high
    

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      Benchmark 10-year yields jump to 12-year highs
    

  
    By Kavya Guduru
       Sept 23 (Reuters) - Gold prices dropped over 1.5% to
their lowest since April 2020 on Friday, hurt by an unrelenting
rally in the U.S. dollar and Treasury yields as the Federal
Reserve adopts a more aggressive stance to check surging
inflation.
    Spot gold  XAU=  was down 1.6% at $1,644.04 per ounce at
1:57 p.m. EDT (1757 GMT), after dropping as much as 1.8% to
$1,640.20 earlier in the session.
    U.S. gold futures  GCv1  settled 1.5% lower at $1,655.60.
    Bullion was headed for a second straight weekly fall, down
about 1.8% so far.
    "We're seeing relentless dollar strength here and that's
going to keep gold vulnerable in the short term," said Edward
Moya, senior analyst with OANDA.
    "The economy is clearly heading towards a recession. The
risks of a hard landing are elevated and this has been just
continuing to drive flows into the dollar, which has been bad
news for gold."
    The dollar  .DXY  touched a 20-year high, dampening demand
for greenback-priced bullion, while benchmark 10-year yields
 US10YT=RR  jumped to their highest since April 2010.  USD/ 
 US/ 
    "This should see (gold) prices trading broadly sideways over
the rest of the year," Fitch Solutions said in a note.
    Surging inflation has prompted several central banks to
tighten monetary policy, with the U.S. Fed raising its benchmark
overnight interest rate by 75 basis points on Wednesday.
 urn:newsml:reuters.com:*:nL1N30T10P  MKTS/GLOB   urn:newsml:reuters.com:*:nL1N30R1F1    
    Gold is highly sensitive to rising U.S. interest rates, as
these increase the opportunity cost of holding non-yielding
bullion, while boosting the dollar, in which it is priced.
    "Gold and the other semi-investment metals like silver and
platinum will likely continue to remain under pressure until the
market reaches peak hawkishness," said Ole Hansen, head of
commodity strategy at Saxo Bank, in a note.
    Other precious metals also fell sharply and were on pace for
weekly losses. Spot silver  XAG=  declined 4.1% to $18.84 per
ounce, while platinum  XPT=  lost 4.8% to $857.46.
    Palladium  XPD=  dropped 4.8% to $2,065.29.
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Gold vs yields    https://tmsnrt.rs/3r1efHP
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 (Reporting by Kavya Guduru in Bengaluru;
Editing by Vinay Dwivedi and Shailesh Kuber)
 ((Kavya.Guduru@thomsonreuters.com;))

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