Gold prices rose on Tuesday, buoyed by a pullback in the dollar and safe-haven buying due to economic slowdown concerns, though prospects of aggressive rate hikes capped further gains.

Spot gold rose 0.5% to $1,718.21 per ounce, as of 0120 GMT.

U.S. gold futures gained 0.5% to $1,731.30.

The dollar index inched down 0.2% after touching a 20-year peak in the previous session.

The euro zone is almost certainly entering a recession, with surveys on Monday showing a deepening cost of living crisis and a gloomy outlook that is keeping consumers wary of spending.

The European Central Bank faces the prospect of raising interest rates aggressively when it meets on Sept. 8 just as the economy enters a downturn.

After Russia halted gas flows via a major pipeline to Europe, several EU states triggered emergency plans that could lead to energy rationing and fueling recession fears, with inflation soaring and interest rates on the rise.

However, further gains in gold were limited by expectations that the U.S. Federal Reserve could deliver another hefty interest rate hike in its fight against inflation during its Sept. 20-21 policy meet.

Even though gold is seen as a hedge against inflation and economic uncertainties, higher interest rates increase the opportunity cost of holding the non-yielding bullion and boosts the dollar.

Spot silver rose 0.9% to $18.32 per ounce, platinum was 0.7% higher at $851.50 and palladium gained 0.7% to $2,047.68.