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Gold dips as firmer U.S. dollar offsets easing bond yields

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Gold edged lower on Friday, as a firmer

dollar made bullion more expensive for other currency holders,

although a pullback in the U.S. Treasury yields limited losses

for the safe-haven metal.

FUNDAMENTALS

* Spot gold was down 0.2% at $1,823.77 per ounce by

0127 GMT. Bullion lost 0.4% so far this week.

* U.S. gold futures were steady at $1,823.20.

* The dollar index held firm near a one-week high,

and was set for a weekly gain against its rivals.

* Benchmark U.S. 10-year Treasury yields slipped

from a more than one-month high hit on Thursday. Lower bond

yields reduce the opportunity cost of holding non-interest

bearing gold.

* Data on Thursday showed that fewer Americans filed new

claims for unemployment benefits last week, while producer

prices increased more than expected in April.

* Recent economic readings out of the United States have

sparked concerns over rising inflation and raised bets over an

earlier-than-expected Federal Reserve rate hike.

* The U.S. central bank has pledged to keep interest rates

low until the economy reaches full employment, and inflation

hits 2% and is on track to “moderately” exceed that level for

some time.

* Gold tends to benefit from lower interest rate environment

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as it reduces the opportunity cost of holding non-yielding

bullion.

* Fed Governor Christopher Waller said he expects inflation

to exceed the Fed’s 2% target for the next two years, but added

that the Fed would not raise rates until it sees inflation above

target for a long time, or excessively high inflation.

* Palladium gained 0.7% to $2,883.71 per ounce, but

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was on track to post a second straight weekly loss with a drop

of about 2%.

* Silver was flat at $27.06 per ounce, while platinum

was up 0.6% at $1,212.88.

DATA/EVENTS (GMT)

1230 US Retail Sales MM April

1315 US Industrial Production MM April

1400 US U Mich Sentiment Prelim May

(Reporting by Shreyansi Singh in Bengaluru, Editing by Sherry

Jacob-Phillips)

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