(Updates prices)
* Dollar index hits four-month high
* European stocks drop to two-week low
* Treasury yields slip to lowest since March 16
By Brijesh Patel
March 24 (Reuters) - Gold prices rose on Wednesday as a pullback in U.S. Treasury yields and worries over lockdowns across the euro zone lifted demand for the safe-haven metal, although a stronger dollar limited bullion's upside.
Spot gold XAU= was up 0.2% at $1,730.86 per ounce by 1206 GMT. U.S. gold futures GCv1 gained 0.2% to $1,729.
"The large part of the reason why gold has rallied off the lows is because we've seen a little bit of softening in U.S. Treasury yields. If yields continue to soften, gold prices can continue to edge higher and head back to the $1,760 level," said CMC Markets UK's chief market analyst Michael Hewson.
But, if the dollar continues to firm, that acts as a bit of a drag on further gains for gold, Hewson added.
The benchmark 10-year U.S. Treasury yields slipped to a one-week low, reducing the opportunity cost of holding non-interest bearing gold. US/
European stocks hit a two-week low as renewed lockdowns across the euro zone and a row over the supply of COVID-19 vaccines dented sentiment. MKTS/GLOB
However, safe-haven gains for the U.S. dollar limited gold's appeal, as the dollar .DXY rose to a four-month high against its rivals. USD/
"Despite a strong US dollar, gold is steady at $1,730 as the bearish pressure seen in the last few weeks looks to be waning," ActivTrades chief analyst Carlo Alberto De Casa said in a note.
"From a technical perspective, the medium term remains negative but the pressure from sellers is slowing down."
U.S. Treasury Secretary Janet Yellen on Tuesday told lawmakers that future tax hikes will be needed to pay for infrastructure projects and other public investments, while Federal Reserve Chairman Jerome Powell reassured that inflation would not spiral out of control. Yellen and Powell are also scheduled to testify to the Senate Banking Panel later in the day.
Elsewhere, palladium XPD= rose 1.3% to $2,637.36, silver XAG= was up 0.6% at $25.23. Platinum XPT= climbed 1.2% to $1,182.07.