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Gold gains as equities slide on soaring bond yields

BENGALURU (Reuters) - Gold prices rose on Thursday as surging U.S. government bond yields and nervousness about inflationary pressures sent stock markets tumbling and investors to seek safety in the precious metal.

FILE PHOTO: Gold bars are seen in the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna, Austria, December 15, 2017. REUTERS/Leonhard Foeger/File Photo

Spot gold was up 0.5 percent at $1,202.96 an ounce by 1523 GMT. U.S. gold futures were 0.3 percent higher at $1,206.60 an ounce.

U.S. stocks fell broadly on Thursday, mirroring weakness in the global markets, as Treasury bond yields surged to multi-year highs on robust U.S. economic data and expectations of further rate hikes from the U.S. Federal Reserve.

“Rising interest rates have caused the stock markets to be a little weaker and people to be little cautious about overall economic growth in the United States and stock prices,” said Jeffrey Christian, managing partner of CPM Group.

“There is a little bit of shift (of money to gold).”

Gold investors shrugged off a surge in U.S. Treasury yields to their highest since mid-2011.

Higher U.S. government bond yields typically weigh on precious metals, as they make Treasuries attractive to investors seeking assets that earn a return as opposed to gold, which earns nothing and costs money to store and insure.

Kitco Metals senior analyst Jim Wyckoff said some investors had turned to gold as a hedge against inflation risk.

Gold has fallen about 12 percent since hitting a peak in April, under pressure from a strong dollar, which has been boosted by a vibrant U.S. economy, rising interest rates and fears of a global trade war.

Higher U.S. interest rates draw investors to the dollar, boosting its value and in turn making assets priced in the U.S. unit more expensive for holders of other currencies. [FRX/]

Strength in the dollar has kept gold in a narrow range in recent weeks.

“The $1,180-$1,210 range has been holding for weeks. It’s not likely to change ... What you are seeing is probably that people are thinking if prices are holding above $1,200, it could move to $1,210,” CPM Group’s Christian said.

Investors are awaiting U.S. non-farm payrolls numbers due on Friday, with a Reuters survey showing economists on average expect a rise of 185,000 in September after a jump of 201,000 in August. Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, dropped 0.8 percent on Wednesday, having declined more than 4.5 million ounces since late April.Among other metals, spot silver was up 0.4 percent at $14.64. Palladium was 0.6 percent higher at $1,061.70, while platinum was up 0.3 percent at $824.65.

Reporting Nallur Sethuraman and Arpan Varghese in Bengaluru; Editing by Edmund Blair and Steve Orlofsky