(Adds comments, updates prices)
* UBS sees gold prices at $1,700/oz at end-March 2022
* 10-year Treasury yields hit five-month high
* Gold trapped between $1,750 and $1,800 - analyst
Oct 21 (Reuters) - Gold prices dipped slightly on Thursday
on elevated U.S. Treasury yields, but there was some support
from concerns over persistently higher inflation.
Spot gold fell 0.2% to $1,777.70 per ounce by 1202
GMT, largely trading in a narrow range. U.S. gold futures
fell 0.3% to $1,780.40.
"Rising yields have been obviously negative for gold, and
yet at the same time you have inflationary pressures rising with
crude oil (prices) surging, which in turn have raised demand for
gold," said Fawad Razaqzada, analyst with ThinkMarkets.
Gold remained trapped between $1,800 resistance and support
around $1,750 due to the conflicting factors, he added.
U.S. benchmark 10-year yields hit their highest in five
While gold is often considered an inflation hedge, reduced
stimulus and interest rate hikes push government bond yields up,
raising the opportunity cost of holding non-yielding bullion.
Two U.S. Federal Reserve officials said on Wednesday that
while the central bank should begin winding down its stimulus
measures, it was too soon for interest rate hikes.
UBS analysts said in a note that rising inflation
expectations and softening growth expectations could support
gold prices in the next month or two, though it is not
indicative of a "regime change" towards stagflation.
The bank forecasts gold prices at $1,700/oz at end-March
2022 and $1,600/oz by end-December 2022.
Capping gold's decline, the dollar index was flat,
having hit a three-week trough earlier in the session.
"The near-term trend is still very much against the dollar
which is supportive for gold prices. A move below 93-93.50
support in the dollar index should force gold above $1,800,"
OANDA analyst Craig Erlam said.
Spot silver fell 0.9% to $24.06 per ounce. Platinum
dropped 1.5% to $1,035.04 and palladium slipped
2.2% to $2,027.00.
(Reporting by Eileen Soreng and Bharat Govind Gautam
Editing by Mark Potter and Nick Macfie)