April 19 (Reuters) – Gold edged higher on Monday, hovering near a seven-week peak hit in the previous session, as a weaker dollar and lower U.S. Treasury yields supported prices.

Spot gold was up 0.2% at $1,778.91 per ounce by 0640 GMT, after hitting its highest since Feb.25 at $1,783.55 on Friday.

U.S. gold futures were steady at $1,780.10 per ounce. “At the moment, the combination of a weaker U.S. dollar and easing interest rates is supportive for gold, despite better economic outlook,” said Michael McCarthy, chief market strategist at CMC Markets.

“We’ve got the momentum. But of course we are at a very important point having just got through that $1,765 level. While we hold above the $1,765 level, the outlook for gold is positive in the short term.”

The dollar index was languishing near a one-month low against its rivals, making gold less expensive for other currency holders.

Benchmark U.S. 10-year Treasury yields edged lower towards multi-week lows touched last week. Lower bond yields reduce the opportunity cost of holding non-interest bearing gold.

Sentiment in equities remained upbeat as Asian shares hovered near 1-1/2-week highs on expectations that monetary policy will remain accommodative the world over.

U.S. Federal Reserve has reiterated its stance to keep monetary policy accommodative until the crisis is over, while Fed officials have said that any spike in inflation is likely to be temporary.

“Inflation expectations are holding above 2.5% amid soaring commodities prices. This along with Fed’s dovish stance on the monetary policy, is keeping the backdrop supportive for bullion,” ANZ analysts said in a note.

Some investors view gold as a hedge against higher inflation that could follow stimulus measures.

Elsewhere, silver fell 0.4% to $25.85 per ounce after hitting a near one-month high in the last session. Palladium rose 0.1% to $2,781.29, while platinum gained 0.8% to $1,211.98.

(Reporting by Brijesh Patel in Bengaluru; Editing by Uttaresh.V and Shailesh Kuber)