Gold edged higher on Monday on prospects of higher inflation following the approval of a $1.9 trillion US stimulus bill, although elevated US Treasury yields capped bullion's gains ahead of a Federal Reserve meeting.

Spot gold was up 0.2% at $1,729.61 per ounce by 1206 GMT. US gold futures rose 0.5% to $1,728.70.

"The strength shown by gold could be hinting that prices are close to bottoming out on a longer-term basis, if gold's role as an inflation hedge is creeping back into investors thoughts. We will have a clearer picture by the end of the week," OANDA senior market analyst Jeffrey Halley said.

"Overall, gold prices seem to be hanging in there despite US yield and dollar strength. Gold could test resistance at $1,740."

President Joe Biden signed the $1.9 trillion stimulus bill into law last week.

Some investors view gold as a hedge against higher inflation that could follow stimulus measures, but higher Treasury yields dull some of the appeal of the non-yielding commodity.

Benchmark US Treasury yields were at their highest in more than a year, while the dollar rose for a second straight session.

Investors are now awaiting a two-day US Federal Reserve meeting this week for policymakers' remarks on a recent spike in bond yields, fears about rising inflation and the economic outlook.

The Bank of England and Bank of Japan also have meetings on Thursday and Friday this week.

"A strong show of dovish intent by (Fed Chair) Powell and team could send Treasury yields lower and lift gold prices higher," Howie Lee, an economist at OCBC Bank wrote in a note.

In other metals, silver gained 0.6% to $26.06 an ounce. Palladium fell 0.7% to $2,355.93, while platinum rose 0.7% to 1,212.85.