PRECIOUS-Gold hits fresh 2018 low as rising yields lift dollar

    * Strong U.S. bond yields underpin dollar
    * GRAPHIC-2018 asset returns:

 (Updates prices; adds comment, second byline, NEW YORK to
    By Renita D. Young and Maytaal Angel
    NEW YORK/LONDON, May 15 (Reuters) - Gold slid more than 1
percent on Tuesday, falling for a third day to hit its lowest
this year as a rise in U.S. borrowing costs pushed up the dollar
and overshadowed the impact of strife in Gaza.
    Downward momentum in gold picked up after the metal broke
below support at its 200-day moving average at $1,306 an ounce.
That firmly underpinned prices earlier this month. 
    Spot gold        lost 1.6 percent at $1,290.91 an ounce by
1:35 p.m. EDT (1735 GMT), earlier hitting its lowest since late
December at $1,289.40. U.S. gold futures         for June
delivery settled down $27.90, or 2.12 percent, at $1,290.30 per
    Israeli troops shot dead dozens of Palestinian protesters on
the Gaza border Monday when the high-profile opening of the U.S.
embassy to Israel in Jerusalem by the Trump administration
raised tension to a boiling point.              
    But gold investors were fixated on the U.S. dollar, which
rose versus a currency basket as 10-year U.S. bond yields shot
above 3 percent, sending borrowing costs higher in a number of
other countries.
    "It's a risk-off play across the board. The downward slide
in pretty much all commodities and equities, you can refer that
to a stronger dollar and higher yields," said David Meger,
director of metals trading at High Ridge Futures. 
    A Federal Reserve official backed the case for further U.S.
interest rate hikes, saying inflation had not yet reached the
U.S. central bank's 2 percent goal in a sustained way.
    Higher U.S. interest rates tend to boost the dollar and 
bond yields, making greenback-denominated gold more expensive
for holders of other currencies and denting the appeal of
non-yielding assets such as bullion.
    "The market's been waiting for the next rate hike by the Fed
... and I think gold prices are going to remain under pressure
till we get through that hike," ANZ analyst Daniel Hynes said in
a note.
    However if yields were to ease, bullion could recover lost
ground over the coming days, market analyst Fawad
Razaqzada said. "Otherwise the only hope for dollar-denominated
gold is a potential correction in the greenback now."
    Silver        declined 1.5 percent at $16.26 an ounce,
earlier hitting its lowest in nearly two weeks at $16.18 an
    Platinum        lost 1.2 percent at $893.99 per ounce,
falling to a 1-1/2-week low of $892.24 per ounce. 
    Palladium        dropped 1 percent at $986 an ounce, earlier
dipping to a one-week low of $964. It broke support at its
200-day moving average at $988 an ounce. 

 (Additional reporting by Jan Harvey in London and Apeksha Nair
in Bengaluru
Editing by Dale Hudson and Alistair Bell)