FUNDAMENTALS * Spot gold rose 0.3% to $1,732.02 per ounce by 0134 GMT, while U.S. gold futures for April delivery rose 0.7% to $1,730.90 per ounce. * Yields on benchmark 10-year notes held near their highest in more than a year on continued U.S. economic optimism after a $1.9 trillion recovery package was signed into law last week. [US/] * Gold is generally considered a hedge against inflation, although higher bond yields have challenged that status recently as they increase the opportunity cost of holding non-yielding bullion. * U.S. producer prices increased strongly in February, leading to the largest annual gain in nearly 2-1/2 years, data showed on Friday.