* U.S. could give Rusal sanctions relief if Deripaska cedescontrol
* Treasury yields near 3 pct rattle stocks, boost dollar (Recasts, updates prices, adds details)
By Maytaal Angel
LONDON, April 23 (Reuters) - Palladium sank 5 percent onMonday amid U.S. hints it might relieve sanctions on Russia'sRusal , while gold hit a two-week low as investorspiled into the dollar with U.S. Treasury yields approaching 3percent.
The United States said it could give sanctions relief toRussian aluminium giant Rusal if Oleg Deripaska cedes control ofthe company, easing fears Washington might extend sanctions tomajor palladium producer Nornickel
Nornickel, by far the world's largest palladium producer, islinked with both Rusal and Deripaska, and fears it might betargeted by U.S. sanctions had sent prices soaring since April6, when sanctions were imposed.
Spot palladium dropped more than 5 percent to asession low of $978.22 an ounce, and traded down 4.8 percent at$980.30 at 1249 GMT. Spot gold fell 0.7 percent to$1,324.81 per ounce, having touched a two week low of $1,323.61.
The U.S. dollar rallied to a seven-week high after a rise inthe yield on 10-year U.S. Treasuries to within awhisker of the psychologically important 3-percent level. Astronger dollar makes dollar-priced gold costlier holders ofother currencies.
"If we break above (3 percent) it will be first time in 5years this has happened and this increases opportunity cost ofholding (non-yielding) gold," said Mitsubishi analyst JonathanButler.
But he said the reason yields were rallying was becauseinterest rates were expected to climb due to rising inflation.
"If inflation is rising, gold provides a hedge," he said,adding there was also longer term upside for gold fromgeopolitical tensions and a U.S. currency stuck in a long-termdowntrend as global central banks begin raising rates.
U.S. gold futures fell 0.8 percent to $1,327.10 perounce.
Gold, seen as a safe haven in times of political turmoil,was also under pressure after North Korea said at the weekend itwould suspend nuclear and missile tests before planned summitswith South Korea and the United States.
Added to this were signs that U.S. China relations might bethawing.
Speculators raised their net long or buy positions in COMEXgold by 5,382 contracts to 143,594 contracts in the week toApril 17, U.S. data showed on Friday.
Spot silver fell 2 percent to $16.77 per ounce whileplatinum
was down 0.5 percent at $918.60 an ounce, havinghit a two week low of $910.75. (Additional reporting by Apeksha Nair; Editing by Edmund Blairand Mark Potter)
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