(Adds comment, updates prices)
* Dollar index hits 2-week high
* Gold could draw support from rising COVID-19 cases- analyst
By Nakul Iyer
March 23 (Reuters) - Gold prices slipped on Tuesday as the dollar's rally to a two-week peak offset a dip in U.S Treasury yields.
"We see a tenuous gold market on the premise that depending on the given day we see forces pushing or pulling in either direction," said David Meger, director of metals trading at High Ridge Futures, adding a gaining dollar, amid hopes of an economic recovery, was keeping bullion pressured.
The dollar .DXY touched its highest since March 9, while U.S. benchmark Treasury yields dipped. A stronger greenback raises the cost of holding bullion for other currency holders. USD/
"Gold has all to do to break out of its current downward trend, especially with the recovering dollar standing in its way," said FXTM market analyst Han Tan.
"Gold has to first break above its 50-day simple moving average in order to send a favourable signal to bullion bulls."
However, the Federal Reserve's signaling of low-interest rates and the likelihood for further fiscal stimulus were capping the metal's losses and gold could draw further support from a potential resurgence in COVID-19 cases and waning economic optimism that would hurt yields, Meger added.
Fed Chair Jerome Powell told U.S lawmakers on Tuesday he expected inflation to rise over the year but it would be "neither particularly large nor persistent." now they (the Fed) would rather err on the side of letting inflation overheat before they do anything," said Frank J. Cholly, senior market strategist at RJO Futures. "They don't want to slam the breaks on an economy that's really beginning to take off" and that should support gold prices, he added.
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