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 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.

"The Delta variant may possibly cause central banks to be a little more dovish... The UK is running an experiment opening up their economy, which might lead to an explosion in the case count. So, owning gold here for that edge is not a bad idea," Innes said.

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.

(Reporting by Brijesh Patel in Bengaluru; Editing by Subhranshu Sahu)