Gold prices fell on Monday as elevated US Treasury yields pressured demand for zero-yield bullion, ahead of a widely expected big interest rate hike by the Federal Reserve to contain rising inflationary pressures.

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Spot gold retreated 0.4 percent to $1,888.56 per ounce while US gold futures dropped 1.3 percent to $1,886.90.

The market is concerned that the Fed could be quite hawkish, pricing in a 50 basis point hike, and it could be 75 basis points in July, said Stephen Innes, managing partner at SPI Asset Management.

The US central bank's Federal Open Market Committee is scheduled to begin its two-day meeting on interest rates on May 3 and announce its decision the next day.

Fed policymakers look set to deliver a series of aggressive rate hikes at least until the summer to deal with rapid inflation and surging labour costs, even as two reports released on Friday showed tentative signs that both may be cresting.

The Fed is still behind, and has constantly tried to keep up with these expectations, so there's a good chance they are looking at current inflation metrics, and "are going to continue to beat the hawkish drum," Innes said.

Benchmark 10-year US Treasury yields rose towards recent multi-year peaks, pressuring demand for gold. Higher short-term US interest rates and bond yields tend to increase the opportunity cost of holding bullion, which yields nothing. Bullion is also seen as a safe store of value during times of economic and political crises.

Spot silver fell 0.6 percent to $22.60 per ounce, platinum dipped 0.5 percent to $926.58, and palladium slid 2.2 percent to $2,268.48.