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PRECIOUS-Gold tumbles 3% as Fed minutes lift dollar, Treasury yields

* Dollar jumps 0.8%, snapping five sessions of losses

* Fed policymakers see more easing ahead -minutes

* Smaller coronavirus aid bill reachable -Trump official

* Interactive graphic tracking global spread of coronavirus: open tmsnrt.rs/3aIRuz7 in an external browser (New throughout, updates prices and adds comments)

Aug 19 (Reuters) - Gold slumped more than 3% on Wednesday, as the dollar jumped and Treasury yields gained after the U.S. Federal Reserve’s July meeting minutes showed policymakers expressed little support to cap bond yields.

Spot gold fell 3.4% to $1,932.09 per ounce by 4:21 p.m. EDT (2021 GMT), while U.S. gold futures settled 2.1% lower at $1,970.30.

“One of the concerns was that the Fed was possibly going to adopt yield curve control, that would’ve been a strong catalyst for continued dollar weakness, but they said they are not considering it right now,” said Edward Moya, senior market analyst at broker OANDA.

“That would have been the most dovish outcome from the minutes, but we didn’t get that,” Moya added.

Capping bond yields could diminish the attractiveness of U.S. Treasury debt and pressure the U.S. currency, boosting the non-yielding metal’s allure.

U.S. Treasury yields rose and the dollar jumped 0.8% after the minutes, ending a five-session slide to over a two-year low.

The Fed reiterated the economic downturn triggered by the coronavirus pandemic faces a highly uncertain path and additional fiscal stimulus would needed to support the economy.

“The expectation that the Fed would do something more has been the catalyst for the selling at this point,” said Jeffrey Sica, founder of Circle Squared Alternative Investments.

“They didn’t give any indication that they are going to create the amount of liquidity the gold investors were hoping for to get the price firmly above $2,000,” Sica added.

Widespread stimulus measures and a low interest rate environment pushed gold prices to an all-time peak on Aug. 7, but bullion has pared gains since then.

Gold was also pressured on Wednesday as a senior Trump administration official said a smaller coronavirus relief bill worth around $500 billion could be reached, as opposed to one between $1 trillion and $3 trillion that had been previously expected.

Elsewhere, silver fell 3.7% to $26.61 per ounce. Platinum dropped 2.9% to $928.53 and palladium fell 1.5% to $2,154.55. (Reporting by Sumita Layek in Bengaluru; additional reporting by Swati Verma Editing by Paul Simao, Marguerita Choy and Will Dunham)

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