* Strong U.S. bond yields underpin dollar
* GRAPHIC-2018 asset returns: (Updates prices; adds comment, second byline, NEW YORK todateline)By Renita D. Young and Maytaal AngelNEW YORK/LONDON, May 15 (Reuters) - Gold slid more than 1percent on Tuesday, falling for a third day to hit its lowestthis year as a rise in U.S. borrowing costs pushed up the dollarand overshadowed the impact of strife in Gaza.Downward momentum in gold picked up after the metal brokebelow support at its 200-day moving average at $1,306 an ounce.That firmly underpinned prices earlier this month.
Spot gold lost 1.6 percent at $1,290.91 an ounce by1:35 p.m. EDT (1735 GMT), earlier hitting its lowest since lateDecember at $1,289.40. U.S. gold futures for Junedelivery settled down $27.90, or 2.12 percent, at $1,290.30 perounce.
Israeli troops shot dead dozens of Palestinian protesters onthe Gaza border Monday when the high-profile opening of the U.S.embassy to Israel in Jerusalem by the Trump administrationraised tension to a boiling point. But gold investors were fixated on the U.S. dollar, whichrose versus a currency basket as 10-year U.S. bond yields shotabove 3 percent, sending borrowing costs higher in a number ofother countries."It's a risk-off play across the board. The downward slidein pretty much all commodities and equities, you can refer thatto a stronger dollar and higher yields," said David Meger,director of metals trading at High Ridge Futures.
A Federal Reserve official backed the case for further U.S.interest rate hikes, saying inflation had not yet reached theU.S. central bank's 2 percent goal in a sustained way. Higher U.S. interest rates tend to boost the dollar and
bond yields, making greenback-denominated gold more expensivefor holders of other currencies and denting the appeal ofnon-yielding assets such as bullion."The market's been waiting for the next rate hike by the Fed... and I think gold prices are going to remain under pressuretill we get through that hike," ANZ analyst Daniel Hynes said ina note.However if yields were to ease, bullion could recover lostground over the coming days, Forex.com market analyst FawadRazaqzada said. "Otherwise the only hope for dollar-denominatedgold is a potential correction in the greenback now."Silver declined 1.5 percent at $16.26 an ounce,earlier hitting its lowest in nearly two weeks at $16.18 anounce.
Platinum lost 1.2 percent at $893.99 per ounce,falling to a 1-1/2-week low of $892.24 per ounce.
Palladium dropped 1 percent at $986 an ounce, earlierdipping to a one-week low of $964. It broke support at its200-day moving average at $988 an ounce.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^GRAPHIC-2018 asset returns ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Additional reporting by Jan Harvey in London and Apeksha Nairin BengaluruEditing by Dale Hudson and Alistair Bell)