Gold prices dropped below the psychologically key threshold of $1,800 on Friday, and were set for a third straight weekly loss, as aggressive monetary policies from top central banks and an elevated U.S. dollar dampened bullion's appeal.

Spot gold was down 0.5% at $1,797.19 per ounce, as of 0547 GMT, after it hit its lowest since May 16 at $1,794.62. U.S. gold futures also dipped 0.5% to $1,798.60. Reuters' technical analyst Wang Tao said a break in spot gold below support at $1,801 per ounce could lead to a fall to $1,784.

Gold prices, coming off their worst quarter since early 2021, have lost about 1.6% this week. Gold, catching a downdraft from the deflated commodity super-cycle thanks to front-loaded Federal Reserve rate hikes and a still strong U.S. dollar, is underperforming despite lower Treasury yields, said Stephen Innes, managing partner at SPI Asset Management.

The dollar firmed towards recent two-decade peaks, continuing to make gold less attractive for buyers holding other currencies. Benchmark U.S. 10-year Treasury yields hit their lowest level since June 6. Investor preference for cash and wealth preservation could very well see gold lower before what should be an expected recovery when recession hits and central banks need to ease, Innes said.

New U.S. data for May showed little immediate relief from the record pace of inflation pushing the Fed towards another oversized interest rate increase next month, but it did add to a developing sense that the worst may be over. Higher interest rates and bond yields raise the opportunity cost of holding bullion, which yields nothing.

Spot silver eased 1.3% to $19.98 per ounce, and has dropped about 5.4% this week, its most since mid-May. Platinum dipped 0.1% to $893.31, and faces a fourth consecutive weekly fall. Palladium dropped 0.9% to $1,920.65, but has gained about 2.2% this week. (Reporting by Bharat Govind Gautam in Bengaluru; Editing by Subhranshu Sahu and Sherry Jacob-Phillips)