(Updates prices)
* Dollar hits fresh four-month high
* Silver drops to over two-month low
* European stocks slip in early trading
By Brijesh Patel
March 25 (Reuters) - Gold prices eased on Thursday as a stronger U.S. dollar overshadowed support from lower bond yields and worries that lockdowns across Europe would take a toll on the pace of economic recovery.
The dollar index .DXY rose to a four-month high against its rivals, making gold more expensive for holders of other currencies. USD/
"We are in a rough patch in terms of risk appetite in general; that could add some support to gold market, but right now the focus is on the dollar," said Saxo Bank analyst Ole Hansen.
"Gold prices need to break above $1,765/oz level to attract renewed momentum."
Spot gold XAU= was down 0.3% at $1,728.58 per ounce by 1156 GMT. U.S. gold futures GCv1 were down 0.3% at $1,728.30 per ounce.
Sentiment in wider financial markets remained weak as investors grew wary about the economic outlook following a new round of coronavirus restrictions in the euro zone and potential U.S. tax hikes. .EU MKTS/GLOB
"With virus cases rising and lockdowns in Europe, the road to recovery might take a little longer, which is leading to lower yields," Hansen said.
Offering some respite to gold, U.S. Treasury yields dipped, with the market appearing to stabilise after benchmark yields reached one-year highs last week. US/
Lower yields reduce the opportunity cost of holding non-interest bearing gold.
"Bullion could see further upside traction if U.S. bond yields stay sluggish, especially in this risk-averse environment with U.S.-Sino tension starting to bubble again," said Stephen Innes, chief global market strategist at financial services firm Axi, in a note.
Among other precious metals, silver XAG= dropped 1.6% to $24.69 per ounce, having fallen to a more than two-month low earlier in the session.
Palladium XPD= rose 0.3% to $2,642.94 per ounce, while platinum XPT= slipped 0.5% to $1,161.33.