PRECIOUS-Gold slips over 1% as dollar, yields dominate


Benchmark Treasury yields hit 14-year peak, dollar index up


Gold still has support around $1,615-$1,620 area - analyst


Platinum, palladium down over 2%

(Updates prices)

Oct 19 (Reuters) -

Gold prices dropped more than 1% to a three-week low on Wednesday as the dollar and U.S. Treasury yields climbed amid bets of more steep rate hikes from the Federal Reserve, reducing the appeal of zero-yield bullion.

Spot gold fell 1.2% to $1,632.20 per ounce by 1221 GMT, its lowest since Sept. 28. U.S. gold futures were down 1.1% at $1,637.

The dollar index gained 0.7%, making gold more expensive for overseas buyers, while benchmark U.S. 10-year Treasury yields scaled a fresh 14-year peak.

“The headwinds are back with a vengeance and blasting gold like a cold arctic wind - the dollar index is sharply higher this morning, while the 10-year Treasury yield has traded through the important 4% level,” said independent analyst Ross Norman.

“Gold bears will be targeting the year’s low at $1,620 seen just a month ago,” Norman said, noting Asia’s appetite to absorb significant amounts of the metal at lower prices.

While gold is generally considered a hedge against inflation, a rising interest rate environment weighs on the metal since it pays no interest.

Minneapolis Fed President Neel Kashkari said on Tuesday the U.S. central bank may need to push its benchmark policy rate above 4.75% if underlying inflation does not stop rising.

“Market participants may want to see a clearer end to Fed’s rate hikes before restoring some confidence in gold prices,” IG market strategist Yeap Jun Rong said.

Meanwhile, a Russian finance ministry official said officials were in talks with the Shanghai Gold Exchange about the admission of gold bars produced by two of the local refineries to support the Russian gold trade.

Gold still has an important support zone placed at $1,615-$1,620, on the bottom reached in late September, said Carlo Alberto De Casa, external analyst for Kinesis Money.

Spot silver slipped 1.9% to $18.4 per ounce, while platinum and palladium each fell 2.2% to $887.98 and $1,968.28, respectively. (Reporting by Arundhati Sarkar and Eileen Soreng in Bengaluru; Editing by Subhranshu Sahu and Alex Richardson)