* U.S. 10-year Treasury yield touches seven-year high

* Further weakness in gold price likely - ABN Amro analyst

* GRAPHIC-2018 asset returns: http://tmsnrt.rs/2jvdmXl

(Updates prices)

By Jan Harvey

LONDON, May 17 (Reuters) - Gold slid to a fresh low for theyear on Thursday as another rise in U.S. bond yields andconcerns over political risk in Italy held the dollar index nearits 2018 peak.

The precious metal has fallen more than 2 percent this weekon gains in the U.S. currency and a rise in U.S. 10-yearTreasury yields to seven-year highs. Higher yields increase theopportunity cost of holding non-yielding assets such as bullion.

Spot gold XAU= was down 0.2 percent at $1,288.25 an ounceby 1145 GMT, off an earlier 4-1/2 month low of $1,285.41 anounce. U.S. gold futures GCv1 for June delivery were down$4.00 at $1,287.50.

The dollar has climbed nearly 4 percent this quarter onexpectations that the Federal Reserve will lift U.S. interestrates further this year to curb inflation, at a time when othercentral banks are still keeping monetary policy loose. FRX/

"I expect further weakness in gold prices because I thinkthe dollar can rise a bit further," ABN Amro analyst GeorgetteBoele said.

"Gold prices are mainly driven by the U.S. dollar and thenU.S. yields ... our year-end 10-year U.S. Treasury forecaststands at 3.2 percent, with three more Fed rate hikes."

The euro remains under pressure, hovering near a five-monthlow on concerns that political developments in Italy could causewider disruption in the common currency bloc. urn:newsml:reuters.com:*:nL5N1SMA1R

Political uncertainty arising out of North Korea afterPyongyang threatened to pull out of a meeting with the UnitedStates was likely to limit downside for gold, analysts said. Butthat was not enough to offset dollar strength. urn:newsml:reuters.com:*:nL3N1SN1QK

From a technical perspective, gold prices were lookingvulnerable to further losses after breaking below key chartlevels this week, according to analysts who study past pricemoves to determine the future direction of trade.

"Gold has eroded key support, namely the 200-day movingaverage, the $1,302.74 March low and the 50 percent retracement(of the December-to-January rally)," Commerzbank said in a noteon technicals. "We have been forced to neutralise our outlook asthe market is now on the defensive."

Among other precious metals, silver XAG= was up 0.3percent at $16.40 an ounce, having touched its lowest in twoweeks at $16.17 in the previous session.

Platinum XPT= was down 0.2 percent at $885.60 an ounce,off an earlier five-month low of $880.50, while palladium XPD= was 0.2 percent lower at $981.80 an ounce.

(Additional reporting by Apeksha Nair in BengaluruEditing by David Goodman and Edmund Blair) ((jan.harvey@thomsonreuters.com; +44 0 207 542 7744; ReutersMessaging: jan.harvey.thomsonreuters.com@reuters.net; Twitter: http://twitter.com/Jan_ReutersGold))