* Holdings in SPDR Gold Trust fall 0.3% on Monday

* U.S. 10-year Treasury hits over three-month peak

* Investor sentiment on gold remains downbeat -analyst

Sept 28 (Reuters) - Gold extended losses on Tuesday, falling 1% on a stronger dollar and U.S. Treasury yields, while investors also waited for policy cues from a speech by Federal Reserve chair Jerome Powell.

Spot gold hit its lowest level since Aug. 11 at $1,730.50 per ounce and was down 1% at $1,732.30 by 1231 GMT.

U.S. gold futures fell 0.9% to $1,736.50.

Benchmark U.S. Treasury yields gained for a fourth consecutive day to hit a more than three-month peak, and the dollar index rose 0.3%, making gold more expensive for holders of other currencies.

The dollar also competes with gold as a 'safe-haven'.

The rise in the 10-year U.S. Treasury yield "provides a massive headline for gold, as it reduces its attractiveness," and the metal looks poised to decline further towards $1,730, said Commerzbank analyst Carsten Fritsch.

Market sentiment therefore remains downbeat with continued ETF outflows and investors are "not very optimistic about prospects for gold," he added.

Holdings of the SPDR Gold Trust fell 0.3% to 990.32 on Monday.

Congressional testimony from Powell is due at 1000 EDT/1400 GMT. Powell recently said the Fed would act against unchecked inflation if needed.

Chicago Fed President Charles Evans on Monday said he expects inflation to rise to 2.4% by 2024 but interest rates to be only on a "gentle incline" upward.

"This concern about more persistent inflation also appears to be becoming a much more consistent theme of central bankers' discourse, with a number of Fed speakers yesterday coming across a little more forcefully when it comes to the start of tapering," CMC Markets UK's chief market analyst Michael Hewson said.

Gold is often considered a hedge against higher inflation, but a Fed rate hike would increase the opportunity cost of holding gold, which pays no interest.

Silver slipped 2% to $22.20 per ounce, palladium fell 0.9% to $1,946.27, while platinum rose 0.4% to $984.28.

(Reporting by Arundhati Sarkar in Bengaluru; editing by Philippa Fletcher and Susan Fenton)