March 28 (Reuters) - Gold prices rose on Tuesday, drawing support from a weaker U.S. dollar even as higher bond yields and receding fears of a full-blown banking crisis limited gains for the safe haven asset.
Following two sessions of declines, spot gold gained 0.3% to $1,961.70 per ounce by 10:25 a.m. EDT (14:25 GMT). U.S. gold futures rose 0.5% to $1,963.70.
The U.S. dollar index fell about 0.2%, making the greenback-denominated precious metal less expensive for holders of other currencies.
"The weaker U.S. dollar index today is adding to some buying interest in the gold market. However, solid buying interest is being squelched by the fact that the banking crisis, at least for the moment, seems to have stabilized," said Jim Wyckoff, senior analyst at Kitco Metals.
U.S. banking regulators vowed to review their rules and procedures after the twin failures while insisting the overall system remains sound, in their prepared remarks when they testify before Congress later on Tuesday over the unexpected failures of regional lenders Silicon Valley Bank and Signature Bank.
"The marketplace is still tentative in that regard, and that's going to keep risk appetite contained for at least the next couple weeks until we think we've moved past this crisis," added Wyckoff.
Wall Street's main indexes were subdued at the open following a three-day rally in the S&P 500 and the Dow that was fueled by support measures for the banking sector and a deal for Silicon Valley Bank assets.
In the near-term, gold prices could slip to $1,933, but the outlook for gold remains bullish with fast approaching peak in U.S. rates and a danger of hitting a recession in coming months, said Ole Hansen, head of commodity strategy at Saxo Bank.
Spot silver was nearly flat at $23.09 per ounce, platinum shed 0.9% to $962.53, while palladium dropped 0.2% to $1,406.07.
