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Gold prices edged higher on Tuesday, supported by a dip in U.S. bond yields, although a stronger dollar and concerns over further rate hikes by the Federal Reserve kept gains in check.

Spot gold was up 0.1% at $1,781.40 per ounce, as of 0241 GMT. U.S. gold futures eased 0.1% to $1,796.70.

Benchmark U.S. 10-year Treasury yields fell for a third session to 2.7788%, decreasing the opportunity cost of holding non-interest-bearing gold. [US/]

Gold prices dropped more than 1% to a one-week low on Monday, as the dollar climbed to a one-week peak on safe-haven bid after weak global economic data reignited recession fears. [USD/]

"A slew of weak data from China has revived fears of a global slowdown, which sent the U.S. dollar higher to the detriment of metals," said Matt Simpson, a senior market analyst at City Index.

"Gold failed to attract safe-haven flows, and its break of $1,783 support likely triggered stops along the way. Also, Friday's mild attempt to close above $1,800 was a clue that all was not well for gold at those highs."

Data on Monday showed U.S. single-family homebuilders' confidence and New York state factory activity fell in August to their lowest levels since near the start of the COVID-19 pandemic.

Industrial output in China expanded at 3.8% in July from year-ago levels, slowing from a 3.9% rise in the prior month.

Adding to slowdown worries, Fed officials have maintained a hawkish tone and hinted at more rate hikes down the year to tame high inflation.

Rising U.S. interest rates and a slowing economy could potentially lead to reduction in demand for bullion.

Investors now await minutes from the Fed's July meeting due on Wednesday for clues on further rate hikes.

Elsewhere, spot silver slipped 0.3% to $20.20 per ounce, platinum fell 0.1% to $932.01, and palladium was up 0.1% at $2,148.76.