Gold prices rose on Tuesday, supported by a drop in U.S. bond yields and concerns over a relentless surge in Delta variant infections, although a stronger dollar kept bullion’s gains in check.

Spot gold was up 0.3% at $1,817.27 per ounce by 0311 GMT, after hitting a one-week low of $1,794.06 in the previous session. U.S. gold futures gained 0.4% to $1,816.70.

”The gold market is getting relief because of extremely low yields. But gold is competing with the dollar for safe-haven demand, so that is going to limit upside momentum over the near-term,” said Stephen Innes, managing partner at SPI Asset Management.

Benchmark 10-year Treasury yields were pinned near five-month lows. Lower yields reduce the opportunity cost of holding non-interest bearing gold.

Rising coronavirus cases across the United States and other countries fuelled fears of a pandemic resurgence, sending shockwaves through stock markets, as the highly contagious Delta variant appeared to be taking hold.

Gold is often used as a safe store of value during times of political and financial uncertainty.

However, safe-haven gains for the U.S. dollar limited gold’s appeal as the dollar index held firm near 3-1/2-month highs against its rivals. A stronger dollar makes gold more expensive for other currency holders.

European Central Bank policymakers are set for a showdown this week as they chart a new policy path amid growing fears of a third wave of coronavirus infections.

Meanwhile, data showed Japan’s core consumer prices rose 0.2% in June from a year earlier to mark the fastest annual pace in over a year.
Silver eased 0.1% to $25.19 per ounce, palladium was steady at $2,593.95, and platinum rose 0.3% to $1,077.98.