* European Central Bank holds policy meeting on Thursday
* Gold taking cues from the Treasury market -analyst
(Updates prices)
By Swati Verma
March 10 (Reuters) - Gold erased earlier losses to hit a one-week high on Wednesday, as U.S. Treasury yields eased after subdued inflation data.
Spot gold XAU= rose 0.5% to $1,723.01 per ounce by 1:59 p.m. EDT (1859 GMT), having bounced as much as $1,723.71, its highest since March 3.
U.S. gold futures GCv1 settled 0.3% up at $1,721.80.
"Gold is still taking cues from the Treasury market and today's data lessens worries about near-term inflation," said Edward Moya, senior market analyst at OANDA.
"If today's 10-year note sale has decent demand, gold prices could eventually make a run towards $1,730. ... The $1,700 level will provide key support ... but that should hold unless the bond market sell-off resumes," Moya said.
10-year U.S. Treasury yields dropped after data showed U.S. consumer prices increased in February, though underlying inflation remained tepid. US/
Gold's status as an inflation hedge has been challenged by higher bond yields, which translate into a higher opportunity cost of holding non-yielding bullion.
Prices fell to their lowest in nine-months on Monday, at $1,676.10.
Real rates have risen sharply over the last few weeks due to higher nominal rates, without a commensurate rise in inflation expectations, TD Securities wrote in a note.
"With massive Treasury issuance on the horizon, the pressure on higher rates should continue to weigh on precious metals in the near-term."
The U.S. House of Representatives paved the way for a $1.9 trillion U.S. COVID-19 relief bill to be considered on Wednesday. European Central Bank is also grappling with a recent rise in yields, but policymakers remain divided on large-scale market intervention ahead of a policy meeting on Thursday. XAG= rose 0.7% to $26.09 an ounce. Palladium XPD= gained 0.1% to $2,299.70, while platinum XPT= jumped 2.6% to $1,199.06.