Gold prices jumped 1% on Tuesday as the dollar slipped, although expectations of more aggressive interest rate hikes by the U.S. Federal Reserve kept the metal closer to a 2-1/2-year trough.

Spot gold rose 1.1% to $1,639.94 per ounce as of 0726 GMT. Prices had hit an April 2020 low of $1,620.20 on Monday.

U.S. gold futures gained 0.9% to $1,647.70.

The dollar index fell 0.4% slipping off a two-decade peak scaled in the previous session. The benchmark 10-year Treasury yield was also off a 12-year peak marked on Monday.

"It is a temporary jump in gold prices," said Vandana Bharti, assistant vice-president, commodity research at SMC Global Securities.

Gold has been gradually losing some shine as a safe-haven asset, Bharti said, adding, "there are more bearish triggers for gold this time as more rate hikes are scheduled by Fed."

U.S. central bank officials on Monday sloughed off rising volatility in global markets and said their priority remained controlling inflation.

Gold, traditionally seen as a safe-haven asset, has failed to benefit from the recent rout in the equities market as U.S. rate hikes have dented the non-yielding bullion's appeal and pushed the dollar to multi-year highs.

Gold prices have declined 20% since rising above the key $2,000 level in March.

"Its (gold's) status as a haven asset in times of economic distress has failed to stem the flow of selling," analysts at ANZ said in a note.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell to 30,333,443 ounces on Monday, its lowest since March 2020.

Spot gold may test a support at $1,558 per ounce in the fourth quarter, a break below could open the way towards $1,437, according to Reuters technical analyst Wang Tao.

Spot silver climbed 2% to $18.70 per ounce, platinum rose 0.9% to $860.00 and palladium was up 0.7% to $2,060.01.

(Reporting by Eileen Soreng and Arundhati Sarkar in Bengaluru; Editing by Rashmi Aich, Subhranshu Sahu and Sherry Jacob-Phillips)