Gold drops over 2% in selloff sparked by strong dollar



* Dollar's 1.4% rise makes gold more expensive for overseas buyers

* Market focus on minutes of Fed June meeting on Wednesday

* India's June gold imports treble y/y on price correction (Updates prices)

By Kavya Guduru

July 5 (Reuters) - Gold lost more than 2% on Tuesday to sink further below the $1,800 support level as a sharp rally in the dollar and rising interest rates sapped appetite for the non-yielding asset.

Spot gold XAU= was trading at $1,765.22 per ounce by 1:45 p.m. ET (1745 GMT), having earlier declined as much as 2.6%. U.S. gold futures GCv1 settled down 2.1% at $1,763.9 per ounce.

Making the safe-haven metal less appealing for overseas buyers, the dollar .DXY hit its highest in about two decades and firmed its position as the preferred refuge for investors worried about a potential recession.

"There are more attractive alternatives" to gold in the rising interest rate environment, said Chris Gaffney, president of world markets at TIAA Bank.

Gold is considered a hedge against inflation, but higher interest rates to tame rising price pressures dim the appetite for bullion which pays no interest.

"The near-term technicals for gold and silver are fully bearish, which is also inviting the technically based speculators to play the short sides of the futures markets," said Jim Wyckoff, senior analyst at Kitco Metals.

Investors now await minutes from the U.S. Federal Reserve's June meeting on Wednesday for new clues on the likely magnitude of rate hikes in the coming months.

In the physical market, India's gold imports in June nearly trebled from year-earlier levels as prices corrected and Zimbabwe's central bank said it would start selling gold coins amid runaway inflation.

Caught in gold's slipstream, spot silver XAG= dropped 4.1% to $19.14 per ounce and platinum XPT= declined 2.4% to $864.23. Palladium XPD= , however, gained 0.6% to $1,934.43.

Russian businessman Vladimir Potanin, the largest shareholder at top palladium producer Nornickel GMKN.MM , said earlier in the day he was ready to discuss a possible merger with aluminium producer Rusal 0486.HK , in part as a defence against Western sanctions.
Reporting by Kavya Guduru in Bengaluru; Editing by Aditya Soni

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