Gold firmed on Wednesday as the dollar and U.S. Treasury yields eased, while palladium held near record highs propped up by supply constraints.

Spot gold rose 0.3pc to $1,784.23 per ounce by 1:50 p.m. EDT (1750 GMT), after falling about 0.8pc on Tuesday. U.S. gold futures settled up 0.5pc at $1,784.30.

"Treasuries are coming in line a little bit so you're getting a bounce in gold," said Bob Haberkorn, senior market strategist at RJO Futures.

"Gold market is kind of discounting what Janet Yellen said yesterday, and seeing the fact that the Fed probably isn't in a position to raise rates at this point," Haberkorn said, adding however the U.S. Treasury Secretary's statement on rates "threw some shade on the market."

Yellen initially said rate increases may be needed to stop the economy overheating as U.S. President Joe Biden's spending plans boost growth, but later downplayed the remarks and said she saw no inflation problem brewing.

The benchmark 10-year yield backed off from earlier highs, while the dollar index eased off a two week-high, helping lift bullion.

Higher yields threaten gold's appeal as an inflation hedge as they increase the opportunity cost of holding non interest-bearing bullion.

"With the Fed pledging to keep rates lower for longer and outlining a higher tolerance for inflation with its new framework, commodity funds could see increasing inflows from investors looking to hedge against inflation risk, which is likely to spill over into gold," Metals Focus said in a note.

Elsewhere, palladium fell 0.7pc to $2,964.08 per ounce, after hitting an all-time high of $3,017.18 on Tuesday, driven by concerns of a shortage of the metal used by automakers in devices used to reduce emissions.

Silver dipped 0.4pc to $26.43 per ounce, while platinum fell 1.1pc to $1,224.45. Both metals hit their highest level in more than two months on Tuesday.