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PRECIOUS-Gold recovers from 7-month low but on course for weekly drop

 (Updates prices)
    * Platinum looks set to post third weekly gain
    * U.S. dollar eyes second straight weekly loss

    By K. Sathya Narayanan and Shreyansi Singh
    Feb 19 (Reuters) - Gold prices edged higher on Friday,
recovering from a more than seven-month low hit earlier as the
U.S. dollar eased, but rising Treasury yields kept bullion on
course for its biggest weekly drop since early January.
    Spot gold        was up 0.3% at $1,780.86 per ounce by 02:17
p.m. EST (1917 GMT), after falling to its lowest since July 2 at
$1,759.29 earlier.
    The safe-haven metal was down about 2.4% so far this week,
its biggest weekly drop since the week of Jan. 8.
    U.S. gold futures        settled up 0.1% at $1,777.40.
    "The drop in the U.S. dollar has likely driven gold higher,"
said Bart Melek, head of commodity strategies at TD Securities,
adding the move could also be technical in nature.
    The dollar        was down 0.3% against key rivals and
looked set to post its second straight weekly loss.       
    "(However), the problem (for gold) continues to be the
yields, and we continue to see rates across the curve move
higher," Melek added.
    Benchmark U.S. Treasury yields             rose to a near
one-year high earlier.       
    While gold is seen as an inflation hedge, higher inflation
expectations have pushed yields up, increasing the opportunity
cost of holding non-yielding bullion.
    Gold should still benefit from continued loose monetary
policy and low real interest rates this year, analysts said. 
    Commerzbank analysts said in a note that gold's behaviour
resembled that of a tsunami, with prices receding in the first
phase before coming back all the more violently.
    Autocatalyst metal platinum        edged 0.2% higher to
$1,277.18 an ounce and was set to post its third straight weekly
gain, having risen to a more than six-year peak earlier in the
week.
    Palladium        rose 1.1% to $2,376.58 an ounce. 
    Silver        rose 0.8% to $27.25, but was set to register a
weekly loss.

 (Reporting by K. Sathya Narayanan, Nakul Iyer and Shreyansi
Singh in Bengaluru; Editing by Jan Harvey, Nick Macfie and Jane
Merriman)
  
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