Gold prices rose on Monday as the dollar dipped, making bullion cheaper for holders of other currencies, but hopes for progress in the treatment of COVID-19 limited gains in the safe-haven metal.

Spot gold was up 0.4% at $1,946.89 an ounce by 1240 GMT, having jumped 1% to $1,961.40 an ounce after early losses.

US gold futures gained 0.8% to $1,961.80.

"The dollar is softer today and, if we look at the larger picture, the world economy is still trying to recover from the effects of coronavirus," said Saxo Bank analyst Ole Hansen.

"Along with that, the risk of inflation continues to attract investors to gold."

The dollar index was down 0.4% after climbing to a more than one-week high in the previous session.

Investors are awaiting US Federal Reserve Chairman Jerome Powell's address to the bank's annual symposium in Jackson Hole, Wyoming, on Thursday for signs of how aggressively it will seek to handle the long-term recovery from the pandemic.

"The US central bank should reiterate its pledge for ultra-low rates, providing some support for gold," Avtar Sandu, a senior commodities manager at Phillip Futures, said in a note.

"(It) may be expected to signal greater tolerance for above-target inflation, keeping real interest rates low."

Lower US interest rates cut the opportunity cost of holding non-yielding bullion.

Central banks worldwide have rolled out massive stimulus measures to alleviate the economic damage caused by the COVID-19 pandemic, but that has also increased the probability of rising inflation.

Restricting gold's advance, equity markets gained for a second straight session after the US Food & Drug Administration authorised the use of blood plasma from patients who have recovered from COVID-19 as a treatment for the disease.

Silverrose 0.8% to $26.90 an ounce, platinum was up 0.6% at $924.29 and palladium eased 0.1% to $2,180.18.