PRECIOUS-Gold holds firm above $1,750 as U.S. bond yields ease

(Adds comment and updates prices)

* Dollar steady near its highest level of the year

* Fed may not be as hawkish as previously expected- analyst

Oct 1 (Reuters) - Gold prices steadied above the key $1,750 level on Friday, drawing support from a dip in U.S bond yields, though a resilient dollar still pressured the safe-haven metal.

Spot gold was little changed at $1,756.56 per ounce by 0710 GMT. The metal was modestly up for the week.

U.S. gold futures were flat at $1,756.40 per ounce.

The dollar began the last quarter of 2021 at close to its highest level of the year, raising the cost of purchasing gold for holders in other currencies.

Sentiment was, however, supported by a dip in U.S. 10 year benchmark Treasury yields.

Gold competes with government bonds as an asset used to hedge against risk and uncertainty and decreased returns on bonds makes bullion, which pays no interest, more attractive.

“The gold market is starting to realise the Fed may not be as hawkish as priced in for the speed of tapering and subsequent rate hikes, especially with recent changes in the FOMC,” said Stephen Innes, managing partner at SPI Asset Management, referring to the recent retirement of two U.S. Federal Reserve policymakers.

But Innes said he was still cautious on the near-term outlook for gold, especially given the uncertain trajectory of the dollar.

Reduced central bank stimulus and interest rate hikes tend to push government bond yields up, in turn raising gold’s opportunity cost.

“While some investors are gripped with fear of lower gold prices, we are seeing many contrarian long term investors buying gold to hedge against inflation and economic risks,” said Vincent Tie, sales manager at Singapore dealer, Silver Bullion.

“We’ll probably see a reversal as we head into Q4, characterized by higher lows in gold prices.”

Silver fell 0.3% to $22.14 per ounce. Platinum was down 0.7% at $957.06 and palladium slipped 1.9% to $1,873.18. (Reporting by Nakul Iyer in Bengaluru; Editing by Subhranshu Sahu and Rashmi Aich, Elaine Hardcastle)