PRECIOUS-Gold slides 1.5% as U.S. Treasury yields continue climb

* Fed's George: rise in long-term rates a sign of optimism

* Palladium nears two-month peak (New throughout, adds comments, updates prices)

By Brijesh Patel

Feb 25 (Reuters) - Gold shed more than 1.5% to a near one-week low on Thursday as a surge in U.S. Treasury yields and better-than-expected economic data out the United States dented demand for the safe-haven metal.

Spot gold was down 1.4% to $1,778.96 per ounce at 10:22 a.m. ET (1522 GMT), after earlier touching its lowest since Feb. 19 at $1,772.14.

U.S. gold futures slipped 1.3% to $1,773.90.

"We're seeing bond yields move higher over the last few weeks and that once again has taken some of the wind out of the sails in the gold market," said David Meger, director of metals trading at High Ridge Futures.

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.

The recent rise in real rates is a sign of growing optimism about the recovery and does not warrant a response from the Federal Reserve, Kansas City Fed President Esther George said, echoing Fed Chair Jerome Powell's testimony on Tuesday.

"Rising government bond yields are at least short-term bearish for the precious metals markets. The shorter-term, chart-based futures trader bears are having their way with the gold market at present," said Kitco Metals senior analyst Jim Wyckoff in a note.

Meanwhile, data showed fewer Americans filed new claims for unemployment benefits last week.

Gold is down nearly 6% so far this year after posting its best year in a decade in 2020 on virus fears, lower interest rates and unprecedented stimulus measures.

"There are other supportive factors for gold at play (including) prospects of another stimulus package. We're not out of the woods yet when it comes to economic recovery and the Fed is unlikely to raise interest rates anytime soon," High Ridge Futures' Meger said.

Silver dipped 0.6% to $27.80 an ounce, and platinum fell 1.6% to $1,248.33.

Palladium climbed 1.5% to $2,473.39, after hitting its highest in nearly two months.

(Reporting by Brijesh Patel in Bengaluru)

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