PRECIOUS-Gold falls 1% as elevated U.S. yields hit safe haven appeal

* Fed Chair Powell reaffirms extended loose monetary policy

* SPDR Gold Trust holdings slip to lowest since May 2020

* Palladium scales more than one-month high (Adds comments, updates prices)

By Diptendu Lahiri

Feb 25 (Reuters) - Gold prices fell 1% on Thursday as U.S. treasury yields remained elevated, with bullion's safe haven appeal also hit by bets for a faster global economic recovery.

Spot gold fell 0.6% to $1,793.39 per ounce by 1039 GMT, after falling as much as 1% earlier in the session. U.S. gold futures eased 0.4% to $1,791.00 per ounce.

"Rising Treasury yields on a better economic outlook in the second half of the year is putting pressure on the metal," Bank of China International analyst Xiao Fu said.

While gold is often sought as a hedge against inflation, higher bond yields have eroded that status since they increase the opportunity cost of holding bullion.

Gold's dip came despite a weaker dollar and U.S. Federal Reserve Chairman Jerome Powell's reiteration on Wednesday that monetary policy would be unchanged until the economy gets back to full employment.

"Overall, there are conflicting forces, we have the rising yields, but a weaker dollar," Bank of China's Fu said.

Mirroring investor sentiment, holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, fell to their lowest since May 2020 on Wednesday.

Gold's weakness can be attributed to its inability to sustain above the $1,800 mark, even with a weakening dollar and stimulus packages that might lead to higher inflation, said Sunilkumar Katke, head of currencies and commodities at Axis Securities.

"But, there are chances that once the market prices in all the positive factors driving riskier assets, and they start consolidating, gold might emerge back and hit the $2,000 level again this year."

Among other precious metals, silver rose 0.3% to $28.06 an ounce. Platinum fell 1%, to $1,255.67 .

Palladium was down 0.4% at $2,427.75 , having earlier climbed to a more than one-month high of $2,444.50.

(Reporting by Diptendu Lahiri in Bengaluru. Editing by Jane Merriman)

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