By Marcy Nicholson and Clara Denina
NEW YORK/LONDON (Reuters) - Gold extended losses into a second day on Thursday as a firm dollar and early strength in bond yields dented its investment appeal, and weighed also by uncertainty over the timing of a U.S. interest rate increase.
Spot gold > was down 0.8 percent at $1,182.31 an ounce by 2:14 p.m. EDT (1814 GMT), holding below the key $1,200 level for a fifth day. U.S. gold futures for June delivery
"Higher real yields rising are the more dominant factor of gold weakness at the moment," ABN Amro analyst Georgette Boele said.
Gold has been trading in a relatively narrow trading range of around $80 an ounce between $1,142 and $1,224 since mid-February, compared to a range of around $150 in January.
Bond yields in Europe and the United States have been rising as deflation fears ease on recovering oil prices and in anticipation of an interest rate increase by the U.S. Federal Reserve later this year.
As gold pays no interest, the rise in returns from U.S. bonds and other markets is seen as negative for the metal.
Germany's 10-year government bond yield hit a 2015 high on Wednesday, while the 10-year U.S. Treasury yield > rose to a five-month high on Thursday but turned lower late in the session.
One U.S. trader said the firm dollar <.DXY> helped to keep pressure on gold prices.
Fed Chair Janet Yellen warned that low long-term U.S. interest rates could rise as the Fed normalizes its policy, causing disruption across the financial system.
"Yellen's comments that bond yields could see a sharp jump continued to weigh on gold," ANZ said in a note.
Gold failed to capitalise on disappointing U.S. economic reports and lower equities, raising concerns about possible further declines, traders said.
Investors are focussed on Friday's U.S. nonfarm payrolls for April for a clearer picture of the health of the economy.
"Gold continues to fail ahead of tomorrow's payrolls data," said Steve Scacalossi, director and head of sales for TD Securities' Global Metals, in a market note.
"Technically it is making lower highs each day and resistance is coming in around $1,193."
Strong data could prompt the Fed to soon hike rates, a move that could hurt demand for non-interest-paying gold.
Silver > fell 1.3 percent to $16.29 an ounce. Platinum > dropped 1.1 percent to $1,129 an ounce, while palladium > was down 1.3 percent at $779 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by William Hardy and David Evans)
