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Gold prices rose on Friday supported by a decline in U.S. Treasury yields, however prospects for further rate hike from the Federal Reserve and a buoyant dollar limited gains.

Spot gold rose 0.5% to $1,727.09 per ounce by 1215 GMT. Prices on Thursday fell to their lowest level in more than a year at $1,680.25 before ending 1.3% higher.

Bullion has gained 1.2% so far this week.

U.S. gold futures rose 0.8% to $1,727.00.

"Yields have drifted lower which could support the yellow metal in the short term," OANDA analyst Craig Erlam said.

"If we are moving towards an acceptance of low growth or recession, gold could build on recent momentum as it may negate the need for the Fed to be as aggressive as is currently priced in," Erlam added.

U.S. 10-year Treasury yields fell to their lowest level in over two weeks. [US/]

Investors now await the U.S. central bank's July 26-27 policy meeting where it is expected to raise interest rates by 75 basis points to combat stubbornly-high inflation.

The ECB joined global peers in the fight against soaring inflation as it raised interest rates by more than expected, despite the euro zone economy suffering from the impact of war in Ukraine.

Rising U.S. interest rates increase the opportunity cost of holding non-yielding bullion, while also boosting the dollar, which again makes gold expensive for overseas buyers. [USD/]

"Should the central bank disappoint markets with a smaller rate hike, this could weaken the dollar – offering some breathing room for gold to fight back," said Lukman Otunuga, senior market analyst at FXTM.

Among other precious metals, spot silver was unchanged at $18.84 per ounce while platinum rose 1% to $880.00.

Palladium rose 0.5% at $1,902.18.