PRECIOUS-Gold edges up as U.S. yields soften

    * Citi lowers 2021 gold price forecast
    * Dollar index holds near four-week peak
    * Silver drops to over one-month low

 (Updates prices)
    By K. Sathya Narayanan
    March 2 (Reuters) - Gold prices edged up on Tuesday, having
earlier slid to its lowest in 8-1/2 months, as U.S. Treasury
yields eased and offset pressure from a stronger dollar.
    Spot gold        was up 0.3% at $1,728.09 per ounce by 1324
GMT, after falling to $1,706.70, its lowest since June 15. U.S.
gold futures        rose 0.6% to $1,733.30 per ounce.
    "We have a bit of a pause in the (rally) in U.S. yields
now," said ABN Amro analyst Georgette Boele. 
    There is some nervousness in the market as investors were
aggressively long in gold and bought it at higher prices,
betting that prices would revisit the highs around $2,000, which
hasn't happened yet, Boele added.
    Benchmark U.S. Treasury yields             have eased off a
one-year high hit last week, while the dollar index held near a
four-week peak.            
    "The strength of the greenback is increasing the bearish
pressure on gold," ActivTrades chief analyst Carlo Alberto De
Casa said in a note.
    While gold is considered a shield against inflation, higher
yields had threatened that status as they increase the
opportunity cost of holding bullion.
    "Diversification out of fixed income into gold can continue,
especially if the focus around inflation overshoot risks
increases," Goldman Sachs Commodities Research said in a note
dated Monday.  
    Focus also remains on the developments of the $1.9 trillion
stimulus bill that will be debated in the U.S. Senate this week.
    Citi analysts lowered their 2021 gold price forecast to
$1,800 per ounce and said that "spot bullion holding support at
$1,750-$1,765 appears critical to avoid a sharper sell-off amid
higher U.S. yields."
    Silver        fell 0.5% to $26.34 an ounce, having earlier
dipped to a more than one-month low. 
    Palladium        was up 0.4% at $2,359.25 an ounce, while
platinum        eased 0.5% to $1,178.83.

 (Reporting by K. Sathya Narayanan in Bengaluru; editing by
David Evans and Jason Neely)