(Updates prices)

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Precious metals set for weekly falls

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U.S. dollar hits 20-year high

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Benchmark 10-year yields jump to 12-year highs

Sept 23 (Reuters) - Gold prices dropped over 1.5% to their lowest since April 2020 on Friday, hurt by an unrelenting rally in the U.S. dollar and Treasury yields as the Federal Reserve adopts a more aggressive stance to check surging inflation.

Spot gold was down 1.6% at $1,644.04 per ounce at 1:57 p.m. EDT (1757 GMT), after dropping as much as 1.8% to $1,640.20 earlier in the session.

U.S. gold futures settled 1.5% lower at $1,655.60.

Bullion was headed for a second straight weekly fall, down about 1.8% so far.

"We're seeing relentless dollar strength here and that's going to keep gold vulnerable in the short term," said Edward Moya, senior analyst with OANDA.

"The economy is clearly heading towards a recession. The risks of a hard landing are elevated and this has been just continuing to drive flows into the dollar, which has been bad news for gold."

The dollar touched a 20-year high, dampening demand for greenback-priced bullion, while benchmark 10-year yields jumped to their highest since April 2010.

"This should see (gold) prices trading broadly sideways over the rest of the year," Fitch Solutions said in a note.

Surging inflation has prompted several central banks to tighten monetary policy, with the U.S. Fed raising its benchmark overnight interest rate by 75 basis points on Wednesday.

Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

"Gold and the other semi-investment metals like silver and platinum will likely continue to remain under pressure until the market reaches peak hawkishness," said Ole Hansen, head of commodity strategy at Saxo Bank, in a note.

Other precious metals also fell sharply and were on pace for weekly losses. Spot silver declined 4.1% to $18.84 per ounce, while platinum lost 4.8% to $857.46.

Palladium dropped 4.8% to $2,065.29.

(Reporting by Kavya Guduru in Bengaluru; Editing by Vinay Dwivedi and Shailesh Kuber)