PRECIOUS-Gold slips as U.S. yields spike; palladium at 1-year peak

    * U.S. Treasury yields scale 14-month peak
    * Dollar recovers from post-Fed drop
    * Gold eases from over two-week high

 (Updates prices)
    By Brijesh Patel
    March 18 (Reuters) - Gold prices dropped on Thursday as a
surge in U.S. bond yields and a firmer dollar hammered bullion's
appeal, while palladium jumped as much as 7% on strong demand
prospects amid supply disruption worries.
    Spot gold        was down 0.7% at $1,732.99 an ounce by
01:49 p.m. EDT (1749 GMT), after touching its highest since
March 1 at $1,755.25.
    U.S. gold futures        settled up 0.3% at $1,732.50.
    The benchmark U.S. 10-year Treasury yield            
vaulted above 1.74% for the first time since January 2020, while
the dollar rose 0.5%.             
    Federal Reserve Chairman Jerome Powell on Wednesday repeated
a pledge to hold interest rates near zero in an effort to keep
the economic recovery on track even if inflation breached its 2%
target this year.             
    "Yesterday's Powell comments on interest rates were very
supportive for gold, but on the other side of the coin the fact
that 10-year yields continue to rise has limited any upside in
gold," said Bob Haberkorn, senior market strategist at RJO
    Some investors view gold as a hedge against higher inflation
that could follow stimulus measures, but higher Treasury yields
dull some of the appeal of the non-yielding commodity.
    "On one hand, the regime doesn't bode well for investment
flows into gold, and that creates pressure to the downside. On
the other hand, we do see some buyers on the dip," TD Securities
commodity strategist Daniel Ghali said.
    Autocatalyst metal palladium        was up 3.6% at
$2,662.17, after earlier hitting its highest since February 2020
at $2,755.18.
    Russia's Nornickel Nickel          , the top producer of
palladium, cut its 2021 output forecast on Tuesday because of
waterlogging at two Siberian mines.             
    "Any disruption in supply, especially out of a major
producer, is absolutely playing into this market, along with
expectations of more demand from the automobile sector," RJO
Futures' Haberkorn said.
    Platinum        gained 0.4% to $1,218.23, while silver
       fell 0.4% to $26.22.

 (Reporting by Brijesh Patel in Bengaluru
Editing by Sonya Hepinstall and Chris Reese and Kirsten Donovan)