* Gold in a downtrend on higher yields -analyst
* U.S. 10-year Treasury yields near to over one-year peak
* China's factory output surges as recovery accelerates (Adds analyst comment, updates prices)
By Asha Sistla
March 15 (Reuters) - Gold prices erased early gains on Monday as hopes of a faster economic recovery got a boost from better-than-expected Chinese data, while a surge in U.S. Treasury yields kept bullion under pressure.
Spot gold XAU= was down 0.1% to $1,724.10 per ounce by 0743 GMT, after rising as much as 0.4% earlier in the session. U.S. gold futures GCv1 were up 0.2% to $1,722.40.
The U.S. yields are being the biggest headwind for gold and as long as they are bound to go higher that pressure on gold is likely to persist, said Harshal Barot, a senior research consultant for South Asia at Metals Focus.
The U.S. dollar held firm, supported by a spike in benchmark Treasury yields to more than one-year highs on continued U.S. economic optimism after a $1.9 trillion recovery package was signed into law last week. USD/ US/ bounced off really oversold levels, so we got some people just trying to buy the dip a little bit and take advantage of that," said IG Market analyst Kyle Rodda, adding the gold market is technically bearish.
"But, the short-term fluctuations tend to be aligned with the U.S. dollar."
Encouraging growth data has also dampened the appeal of the safe-haven metal. Data earlier showed China's industrial output growth quickened in January-February, beating expectations. prices fell to a nine-month low of $1,676.10 last week, pressured by accelerating bond yields, which increase the opportunity cost of holding non-yielding bullion.
Investors are now awaiting the U.S. Federal Reserve meeting this week for direction on monetary policy.
"A strong show of dovish intent by (Fed Chair) Powell and team could send Treasury yields lower and lift gold prices higher," Howie Lee, an economist at OCBC Bank wrote in a note.
In other metals, silver XAG= shed 0.2% to $25.87 an ounce. Palladium XPD= fell 1% to $2,347.61 and platinum XPT= was down 0.2% to $1,202.69.