PRECIOUS-Gold muted as rising U.S. yields curb appeal

* Dollar hits fresh 2-1/2 month low
* Gold falls as much as 1% to session low of $1,816.90/oz

(Updates prices)
By Eileen Soreng
May 11 (Reuters) - Gold prices were subdued on Tuesday as
rising U.S. Treasury yields countered support from a weaker
dollar and investors awaited U.S. consumer price data to gauge
inflation.
Spot gold XAU= fell by as much as 1% to a session low
of$1,816.90 per ounce before paring losses and was down 0.1% at
$1,834.19 per ounce by 1:43 p.m. EDT (1743 GMT).
U.S. gold futures GCv1 settled down 0.1% at $1,836.1.
"If yields continue to rise, this may drag the precious
metal lower despite the risk-off mood," said Lukman Otunuga,
senior research analyst at FXTM.
Benchmark U.S. 10-year Treasury yields US10YT=RR rose for
third straight day, increasing the opportunity cost of holding
non-interest bearing bullion. US/
However, "the U.S. dollar index is weaker today ... That's
positive for the metals market, so I wouldn't be surprised to
see this pullback as a buying opportunity for the shorter term
futures traders," said Kitco Metals senior analyst Jim Wyckoff.
The dollar index .DXY hit a more than two-month low in the
session, helping gold pare its earlier loses.
Investors were also awaiting the U.S. consumer price index
for April, due on Wednesday, to gauge whether the Federal
Reserve will begin to alter its stance on inflation.
At a time of heavy government stimulus, gold is considered a
hedge against potential inflation.
Fed officials would like to see higher inflation, more wage
growth and several months of strong employment gains before they
consider adjusting monetary policy, Chicago Fed Bank President
Charles Evans said on Monday. "Bulls remain in control as long as $1,800 proves to be
reliable support ... A solid weekly close above $1,840 could
signal a move higher towards $1,855 and $1,870, respectively,"
FXTM's Otunuga said.
Elsewhere, palladium XPD= fell 1.1% to $2,928.00 per
ounce, while platinum XPT= was down 0.6% at $1,240. Silver
XAG= gained 0.8% to $27.54 per ounce.