Gold gains on lower US yields even as dollar holds firm

Gold prices rose on Wednesday as U.S. Treasury yields held close to one-week low, with bullion shrugging off strength in the dollar following Federal Reserve Chairman Jerome Powell's reassurance that inflation would not spiral out of control.

Spot gold was up 0.3% at $1,731.75 per ounce by 0300 GMT. U.S. gold futures were up 0.4% at $1,732.70 per ounce.

"Gold looks to have found some buyers in early Asia, but it is just investors buying the dip ... If yields keep falling, that should be supportive for gold," said OANDA senior market analyst Jeffrey Halley.

Treasury yields slipped to the lowest since March 16, while the dollar jumped above a two-week high after Powell told U.S lawmakers on Tuesday he expected inflation to rise over the year but it would be "neither particularly large nor persistent."

Treasury Secretary Janet Yellen said the U.S. economy remains at risk as she fielded lawmakers' questions about possible infrastructure and tax increase plans under consideration.

"The possibility of higher taxes, whether corporate or individual, tends to raise the demand for bullion as a safe haven," James Steel, chief precious metals analyst wrote in a note.

Both Yellen and Powell are also scheduled to testify to the Senate Banking Panel on Wednesday.

"Gold has support nearby at $1,720, and if the U.S. dollar strengthens in Asia and Europe, it could test that level prompting some stop loss selling," OANDA's Halley added.

Elsewhere, palladium was down 0.1% at $2,601.96, silver edged up 0.3% to $25.16 and platinum was steady at $1,168.08.

"Palladium is slightly on the defensive as near-term supplies of the metal appear adequate despite temporary PGM (Platinum Group Metals) mine closures," HSBC's Steel wrote.