PRECIOUS-Gold rises on falling yields, focus shifts to Fed meeting

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    * Fed meeting due on July 26-27
    * Gold headed for weekly gain

 (Recasts, adds detail, updates prices)
    By Arundhati Sarkar
    July 22 (Reuters) - Gold prices rose on Friday supported by
a decline in U.S. Treasury yields, however prospects for further
rate hike from the Federal Reserve and a buoyant dollar limited
gains. 
    Spot gold        rose 0.5% to $1,727.09 per ounce by 1215
GMT. Prices on Thursday fell to their lowest level in more than
a year at $1,680.25 before ending 1.3% higher. 
    Bullion has gained 1.2% so far this week.
    U.S. gold futures        rose 0.8% to $1,727.00.
    "Yields have drifted lower which could support the yellow
metal in the short term," OANDA analyst Craig Erlam said.
    "If we are moving towards an acceptance of low growth or
recession, gold could build on recent momentum as it may negate
the need for the Fed to be as aggressive as is currently priced
in," Erlam added. 
    U.S. 10-year Treasury yields fell to their lowest level in
over two weeks.      
    Investors now await the U.S. central bank's July 26-27
policy meeting where it is expected to raise interest rates by
75 basis points to combat stubbornly-high inflation.
            
    The ECB joined global peers in the fight against soaring
inflation as it raised interest rates by more than expected,
despite the euro zone economy suffering from the impact of war
in Ukraine.                          
    Rising U.S. interest rates increase the opportunity cost of
holding non-yielding bullion, while also boosting the dollar,
which again makes gold expensive for overseas buyers.       
    "Should the central bank disappoint markets with a smaller
rate hike, this could weaken the dollar – offering some
breathing room for gold to fight back," said Lukman Otunuga,
senior market analyst at FXTM.
    Among other precious metals, spot silver        was
unchanged at $18.84 per ounce while platinum        rose 1% to
$880.00.
    Palladium        rose 0.5% at $1,902.18.

 (Reporting by Arundhati Sarkar and Ashitha Shivaprasad in
Bengaluru; editing by Jason Neely and Elaine Hardcastle)