PRECIOUS-Gold holds firm above $1,800 as U.S. bond yields weaken

(Adds comment, updates prices)

* BOJ maintains easy policy, lowers inflation projections

* Negative real yields could help gold rise above $1,850/oz- ANZ

Oct 28 (Reuters) - Gold prices consolidated slightly above the key $1,800 level on Thursday, supported by softer U.S. bond yields as investors focused on how central banks respond to rising price pressures.

Spot gold rose 0.3% to $1,802.40 per ounce by 0727 GMT. U.S. gold futures gained 0.3% to $1,803.90.

Benchmark 10-year U.S. Treasury yields steadied close to a two-week trough, decreasing the opportunity cost of holding non-yielding bullion.

“We’re seeing some more buyers being drawn into the gold market and that’s partly around the narrative of higher prices,” said Nicholas Frappell, global general manager at ABC Bullion.

Investors now await the European Central Bank (ECB) policy meeting due later in the day, followed by the U.S. Federal Reserve meeting on Nov. 3. [nL4N2RM2LY

Market participants also took stock of the Bank of Japan retaining its easy monetary policy and projecting inflation at well below its target for at least the next two years.

Gold is often considered an inflation hedge, though reduced stimulus and interest rate hikes push government bond yields up, denting gold’s appeal.

“Negative real yield and inflation risks will help gold prices to move to $1,850/oz before retreating next year and beyond,” ANZ analysts said in a note, cautioning that an expected Fed taper announcement in November weighed on gold’s outlook.

Demand for gold fell in the third quarter to its lowest since the last quarter of 2020, the World Gold Council (WGC) said.

WGC, however, expects physical demand in large consumer India to strengthen in the fourth quarter.

Platinum gained 0.6% to $1,016.77 and palladium rose 1.3% to $1,990.23.

“Slowing auto growth due to semi-conductor supply shortages is weighing on auto catalyst demand for PGMs. We see prices remaining volatile until micro-chip shortages ease,” ANZ said.

Spot silver rose 0.1% to $24.06 an ounce. (Reporting by Nakul Iyer in Bengaluru; Editing by Sherry Jacob-Phillips, Subhranshu Sahu and Mike Harrison)