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Gold prices rose on Tuesday as the dollar slipped, although an improvement in risk appetite after efforts by regulators to allay fears over the global banking system limited the safe-haven metal's appeal.

Spot gold was up 0.2% at $1,958.85 per ounce, as of 0308 GMT. U.S. gold futures rose 0.4% to $1,960.80.

"The U.S. dollar seems to be stabilising, this should entice fresh buying back into the (gold) market," said Clifford Bennett, chief economist at ACY Securities.

The dollar index fell 0.2%, making bullion more affordable for buyers holding other currencies. [USD/]

Gold prices declined more than 1% on Monday as investors scaled back on safe-haven trading in favour of riskier assets after First Citizens BancShares said it would take on the deposits and loans of failed Silicon Valley Bank. [MKTS/GLOB]

However, gold remains the "resolute safe-haven" in a "rolling risk environment" for the banking sector as risks of contagion are far more persistent than the market would like to believe, Bennett added.

The U.S. government will continue using its tools to prevent contagion in the banking sector, as warranted, to ensure that Americans' deposits are safe, the Treasury undersecretary for domestic finance, Nellie Liang, will tell the Congress on Tuesday.

The U.S. Federal Reserve is "still learning" how much impact its interest rate increases have had on the economy and inflation, Federal Reserve Governor Philip Jefferson said on Monday.

Markets are pricing in a 61% chance of the Fed standing pat on interest rates in its May meeting, according to the CME FedWatch tool.

Bullion is considered a hedge against economic uncertainties, although higher rates increase the opportunity cost of holding the non-yielding asset.

Gold might retest a support at $1,945 per ounce, a break below could open the way towards $1,927, Reuters technical analyst Wang Tao said.

Spot silver eased 0.1% to $23.06 per ounce, while platinum rose 0.5% to $976.87 and palladium added 0.7% at $1,418.44.