2021.03.1810:10:00UTC+00Gold Slips From Two-week High As Yields Breach Key Levels

Gold prices gave up early gains to turn mixed on Thursday as Fed Chair Jerome Powell's promise to look past inflation raised long-dated bond yields and steepened the Treasury curve to new 5-1/2 year highs.

The Fed's assessment of U.S. growth, which could be fastest since 1984 this year, also weighed on the precious metal.

Spot gold dropped half a percent to $1,735.70 per ounce, after having touched its highest since March 1 at $1,755.25. U.S. gold futures were up 0.4 percent at $1,734.10, after having surged more than 1 percent earlier.

The dollar pushed higher helped by rising U.S. Treasury yields after the Federal Reserve said it expects inflation to rise to 2.4 percent in 2021, much higher than the target inflation rate of 2 percent, before slowing to 2 percent in 2022.

Investors worry that if inflation picks up, central banks might respond by raising interest rates, which would cool economic growth.

The U.S. economy was on track for its fastest expansion in nearly 40 years, the Fed said on Wednesday while reaffirming its ultra-easy monetary policy stance.

Higher U.S. interest rates and Treasury bond yields raise the opportunity cost of holding non-yielding bullion.