Gold edged higher on Monday, hovering near a seven-week peak hit in the previous session, as a weaker dollar and lower U.S. Treasury yields supported prices.

Spot gold was up 0.1% at $1,777.33 per ounce by 0238 GMT, after hitting its highest since Feb.25 at $1,783.55 on Friday. U.S. gold futures edged 0.2% lower to $1,777.

"At the moment, the combination of a weaker U.S. dollar and easing interest rates is supportive for gold, despite better economic outlook," said Michael McCarthy, chief market strategist at CMC Markets.

"We've got the momentum. But of course we are at a very important point having just got through that $1,765 level. While we hold above the $1,765 level, the outlook for gold is positive in the short term."

The dollar index was languishing near a one-month low against its rivals, making gold less expensive for other currency holders.      

Benchmark U.S. 10-year Treasury yields edged lower towards multi-weeks low touched last week. Lower bond yields reduce the opportunity cost of holding non-interest bearing gold.     

Sentiment in equities remained upbeat as Asian shares hovered near 1-1/2-week highs on expectations that monetary policy will remain accommodative the world over.            

U.S. Federal Reserve has reiterated its stance to keep monetary policy accommodative until the crisis is over, while Fed officials have said that any spike in inflation is likely to be temporary.            

"With rates volatility falling like a stone as the Fed pricing is off the boil and the dollar looking posed to weaken further, gold has been back in demand from both paper and physical markets," Stephen Innes, chief global market strategist at financial services firm Axi, said in a note.

Elsewhere, silver fell 0.6% to $25.81 per ounce after hitting a near one-month high in the last session. Palladium eased 0.3% to $2,766.91, while platinum was steady at $1,203.61.

(Reporting by Brijesh Patel in Bengaluru; editing by Uttaresh.V)

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