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LONDON/ROTTERDAM: Gold dropped more than 2% on Thursday to break below the key psychological $1,800 level as a jump in the dollar and US Treasury yields eroded bullion's appeal.

Spot gold was 2.3% lower at $1,790.92 per ounce by 10:44 a.m EST (1544 GMT), after touching a more than two-month low of $1,784.76. US gold futures slipped 2.5% to $1,788.80.

Silver was caught in the slipstream, losing 2.6% to $26.16.

Silver prices have declined more than 13% since a GameStop-style retail frenzy sent them to their highest in nearly eight years at $30.03 on Monday.

The steepening of the yield curve "ultimately means the cost of holding gold across the curve is increasing. Gold could go even lower and consolidate in response to... the whole idea that the US and global economy is recovering," said Bart Melek, head of commodity strategies at TD Securities. However, going forward silver could benefit from its demand for industrial purposes, Melek added.

Making bullion more expensive for holders of other currencies, the dollar scaled an more than two-month peak while longer-term US Treasury yields rose on anticipation of a large pandemic relief package from Washington and a stabilizing US labour market.

While gold usually gains from more stimulus, since it is considered a hedge against inflation from widespread stimulus measures, higher yields challenge that status because they increase the opportunity cost of holding non-yielding bullion.

Platinum fell 1.16 %, to $1,088.22 an ounce and palladium eased 0.3% to $2,267.29.

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