PRECIOUS-Gold prices at 8-1/2-month low on firmer dollar, higher yields

    * Dollar index holds near four-week peak
    * Silver drops to over one-month low

 (Updates prices)
    By Sumita Layek
    March 2 (Reuters) - Gold prices slumped to their lowest in
8-1/2 months on Tuesday, as a stronger dollar and elevated U.S.
Treasury yields eroded investor appetite for the non-yielding
    Spot gold        eased 0.4% to $1,716.30 per ounce by 0821
GMT, having dropped to its lowest since June 15 at $1,706.70
earlier in the session. U.S. gold futures        slipped 0.3% to
    The potential for higher yields is putting pressure on gold,
while a stronger dollar is also contributing to its fall,
Michael McCarthy, chief market strategist at CMC Markets said,
adding that a minor retreat in 10-year yields was "too small to
    Benchmark U.S. Treasury yields             have come down
from a one-year high hit last week, but continue to remain
elevated, while the dollar index held near a four-week
    Yields are signalling "that by mid-year, inflationary
pressures will mean that global central banks would have to
tighten their policy, while central banks suggest that will not
be the case ... if inflation rises, they'll have very little
choice," McCarthy said.             
    While gold is considered a shield against inflation, higher
yields have of late threatened that status, since they translate
into higher opportunity cost of holding bullion, which pays no
    "At current levels, (gold's) bull run is not over. It is
challenged by the changing rates environment," said Nicholas
Frappell, global general manager at ABC Bullion, adding that
prices could test the $1,670-$1,690 level.    
    Focus also remains on the developments of the $1.9 trillion
U.S. coronavirus relief bill that will be debated in the Senate
this week.             
    Holdings of the world's largest gold-backed exchange-traded
fund, SPDR Gold Trust       fell to their lowest since May 2020
on Monday.          
    Silver        eased 2% to $25.95 an ounce, having earlier
slipped to its lowest in more than one month. Palladium       
ticked 0.2% lower to $2,345.12 while platinum        fell 1% to

 (Reporting by Sumita Layek in Bengaluru, Editing by Sherry
Jacob-Phillips and Ramakrishnan M.)