Gold edged up in choppy trading on Monday as a buoyant U.S. dollar was offset by Treasury yields slumping to their lowest since February.

Spot gold rose 0.2% to $1,815.16 per ounce by 10:00 am EDT. U.S. gold futures fell 0.1% to $1,812.70. "Gold is caught in a tug-of-war between a rising dollar that weighs down on the precious metal and a drop in risk appetite, which supports it's price," said Ricardo Evangelista, a senior analyst at ActivTrades.

A stronger dollar, which hit a more than three-month high, drove gold to a one-week trough earlier in the session, but a sharp fall in U.S. benchmark Treasury yields helped gold pare its early losses. 

Sentiment in riskier markets was bruised by investors' fears over a relentless surge in coronavirus cases, which forced many Asian countries into imposing lockdowns, and growing inflationary pressures.

"Stagflation could become a really interesting element if we keep seeing slowing economic growth coupled with some inflationary fears," said Jim Wyckoff, senior analyst with Kitco Metals.

"Theoretically, stagflation should be bullish for gold because you've got rising inflation, which suggests investors are going to look at hard assets including gold and slowing economic growth which might put in a safe-haven bid."

Focus is now likely to turn to next week's U.S. Federal Reserve and European Central Bank meetings. 

"(Gold) investors are also pricing in the expectation that recent spikes in inflation will force the hand of the Fed, driving a higher likelihood of earlier than previously expected rate hikes and tapering of the asset purchase program," ActivTrades' Evangelista said.

Higher interest rates tend to weight on bullion as they translate into a higher opportunity cost.

Elsewhere, silver dropped 1.4% to $25.31 per ounce, platinum fell 1.4% to $1,086.84 and palladium was down 0.7% at $2,612.48.

(Reporting by Nakul Iyer and Arundhati Sarkar in Bengaluru; Editing by Steve Orlofsky) ((nakul.iyer@thomsonreuters.com; Within U.S. +1 646 223 8780, Outside U.S. +91 80 6749 0417; Reuters Messaging: nakul.iyer.thomsonreuters.com@reuters.net))