Gold hits seven-week low as dollar climbs, U.S. yields rise

By Marcy Nicholson and Jan Harvey

NEW YORK/LONDON (Reuters) - Gold slid to a seven-week low on Monday and headed for its biggest one-day loss since November as the dollar rebounded and 10-year U.S. Treasury yields climbed, weighing on appetite for non-interest bearing bullion.

Spot gold was down 1.6 percent at $1,221.42 an ounce by 2:30 p.m. EDT (1830 GMT), after falling below the 200-day moving average and reaching $1,218.83, the lowest since May 11.

U.S. gold futures for August delivery settled down 1.9 percent at $1,219.20. Trade will halt early on Tuesday for the U.S. Independence Day holiday.

Rising bond yields and soft physical demand are weighing on interest in gold, Commerzbank analyst Carsten Fritsch said.

The link between gold and yields is currently stronger than the gold-U.S. dollar connection, he said. "This is due to the fact that the exit from ultra-loose monetary policy is not only related to the Fed anymore," he said.

U.S. and European shares kicked off the new quarter with gains as talk of interest rate increases boosted bank stocks, while the dollar rose above nine-month lows and U.S. Treasury yields hit their highest since mid-May. [MKTS/GLOB]

Germany's 10-year government bond yield pulled back after last week's sharp selloff, but held near 3-1/2 month highs. [GVD/EUR]

Gold failed to benefit from dollar weakness in the second quarter, as this was driven largely by expectations for tightening monetary policy outside the United States.

Standard Chartered said in a note that it expects a strong U.S. employment report this week.

"Core PCE (personal consumption expenditures) will be keenly watched, especially after softer-than-expected inflation prints recently," said Standard Chartered in a note.

"The FOMC minutes are likely to be scrutinized given the inflation data and our economists believe the Fed will announce changes to the balance-sheet reduction in September and move in October; we expect one more 25 bps rate hike in December and two in 2018."

Minutes from the U.S. Federal Reserve's June 13-14 meeting will be released on Wednesday at 1800 GMT.

U.S. Mint sales of American Eagle gold coins reached 192,500 ounces in the first half of the year, the lowest for this period in a decade. The Perth Mint's gold sales in June fell 39 percent year on year.

Silver was down 2.6 percent at $16.13 an ounce, after falling to $16.02, the weakest since May 9.

Palladium, the last quarter's biggest riser with a near 6 percent gain, was up 0.4 percent at $845 an ounce, while platinum was 2.2 percent lower at $900.75 an ounce.

(Additional reporting by Nithin Prasad and Koustav Samanta in Bengaluru; Editing by Susan Thomas and Lisa Shumaker)