Gold prices increased slightly on Monday as U.S. Treasury yields eased and concerns over the surge in Delta variant infections intensified. The decline in benchmark 10-year government bond yields lowered the opportunity cost of owning the non-interest-bearing bullion. But the yellow metal’s gains were capped by a stronger dollar. The greenback hovered near a 3-1/2-month peak and made gold more expensive for investors using rival currencies.

The rising number of Delta variant infections forced several European countries to impose tighter restrictions. France, Italy and Egypt require proof of vaccination or immunity to engage in an array of activities, including indoor dining and going to the gym and cinemas. England will also require patrons of nightclubs and other venues with large crows to present proof of full vaccination starting September. Malta banned visitors over 12 years old unless fully vaccinated.

Spot gold is currently trading at $1,810.94 per ounce as of 0742 GMT.

Stephen Innes, a managing partner at SPI Asset Management, said the rise in Delta variant infections supports gold prices. It is because the situation is likely to force central banks to keep a dovish monetary policy. However, he predicted that the coronavirus problem needs to deteriorate significantly to lure back investors back into gold.

OCBC analysts added that the bullion would consolidate sideways in the near term. It is because gold prices have been dependent on the movements of the dollar and the Treasury yields.

The next major catalyst for gold is the upcoming meeting of the U.S. Federal Reserve because of its market-moving potential. The central bank is expected to leave monetary policy unchanged. But market participants will be monitoring the Fed’s progress on its economic objectives and the pace of adjustments to quantitative easing.

In physical trading, price volatility dampened the demand for gold in India last week. It forced dealers to discounts of up to $6 per ounce over official domestic prices. There was also a slight increase in gold premiums in other major Asian hubs. Gold premiums ranged from $1-3 in China, $0.90-1.80 in Hong Kong, $1.30-1.80 in Singapore, and $0.50 in Japan.

In a related development, the U.S. Commodity Futures Trading Commission reported that market speculators raised their bullish stance in COMEX gold contracts for the week that ended on July 20.