Gold prices flat as firmer U.S yields hurt appeal

Jan 18 (Reuters) - Gold prices were flat on Tuesday as a weaker dollar partially offset pressure from elevated U.S. Treasury yields, which dim the appeal of a non-yielding bullion.

Spot gold held its ground at $1,818.87 per ounce, as of 0022 GMT. U.S. gold futures edged up 0.1% to $1,818.50.

Treasury yields rose along the curve on Tuesday, lifting the short end to new pandemic highs on rate hike expectations.

The focus is now on the U.S. Federal Reserve's Jan. 25-26 meeting after policymakers signalled that they would start raising interest rates in March to tame inflation.

Gold is considered an inflationary hedge, but the metal is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-interest bearing bullion.

The U.S. dollar slightly weakened, and was close its lowest level in two months, making greenback-priced gold more attractive for overseas buyers.

The Bank of Japan is expected to upgrade its inflation forecast on Tuesday and acknowledge budding signs of change in the country's deflationary mindset, as stubbornly high global commodity costs prompt more firms to raise prices.

Australian consumer confidence took a battering last week as an explosion in coronavirus cases triggered self-imposed lockdowns, squashing spending and blowing holes in supply chains.

The global job market will take longer to recover than previously thought, with unemployment set to remain above pre-COVID-19 levels until at least 2023 due to uncertainty about the pandemic's course and duration, the International Labour Organization said in a report on Monday.

Spot silver was up 0.1% at $23.02 an ounce, platinum rose 0.3% to $974.43, and palladium was flat at $1,874.66.