Gold set for first weekly drop in three as yields, dollar strengthen

April 22 (Reuters) – Gold prices slipped on Friday, pressured by the strength in U.S. Treasury yields and the dollar, which also put bullion on course for its first weekly loss in three.

Spot gold was down 0.1% at USD 1,949.33 per ounce, as of 0242 GMT. U.S. gold futures were up 0.2% at USD 1,952.00.

“The outlook for gold is subdued as rising rates obviously weigh, but until we break the trading range (between USD 1,930 to under USD 2,000) in a convincing manner … we really don’t have much of a direction for gold,” said Michael McCarthy, chief strategy officer at Tiger Brokers, Australia.

Benchmark U.S. 10-year Treasury yields extended gains as Federal Reserve officials took a hawkish tone on tightening policy, cementing the view that the U.S. central bank will hike interest rates aggressively as it fights soaring inflation.

Gold is highly sensitive to rising U.S. short-term interest rates and higher yields, which increase the opportunity cost of holding non-yielding bullion.

A stronger U.S. dollar could also pressure gold, while on the other hand, the geopolitical uncertainty remains a support and the gold price is stuck in the middle of those two conflicting currents, McCarthy said.

A firmer dollar makes greenback-priced gold less attractive for overseas buyers.

Gold is down about 1.3% so far this week. Prices rose to near the key mark of USD 2,000 per ounce on Monday on safe-haven demand and mounting worries over inflation, but have since pulled back to hit a two-week low in the previous session.

“With stagflation moving from a potential tail risk to reality, investors worldwide are turning to gold as a keen portfolio diversifier,” Stephen Innes, managing partner at SPI Asset Management said in a note.

Spot silver XAG= fell 0.6% to USD 24.50 per ounce, and platinum eased 0.2% to USD 966.56, with both poised for weekly dips. Palladium rose 0.4% to USD 2,431.69.

(Reporting by Bharat Govind Gautam in Bengaluru; Editing by Rashmi Aich and Sherry Jacob-Phillips)