Gold prices edge up as easing trade concerns hurt dollar

By Sethuraman N R

BENGALURU (Reuters) - Gold prices inched higher on Thursday as the dollar softened amid easing Sino-U.S. trade tensions, but investors remained cautious ahead of next week's U.S. Federal Reserve policy meeting.

Spot gold was up 0.1 percent at $1,204.69, as of 0628 GMT, after rising 0.5 percent in the previous session. U.S. gold futures were up 0.1 percent at $1,209.30 an ounce.

"The risk (sentiment) is sort of flattening, but that's also taking wind out of the safe-haven appeal of the U.S. dollar (helping gold) ... For gold to break $1,210, we need to see the dollar weakening against the emerging market currencies as well as the euro," said Stephen Innes, APAC trading head, OANDA.

"However, there is not much of a safe-haven appeal (for gold) as the market is not packing in a lot of punch to trade war."

Earlier this week, Washington imposed 10 percent tariffs on Chinese goods worth $200 billion, while China retaliated with levies on about $60 billion worth of U.S. goods at scaled-back rates.

Investors have been buying the dollar believing that United States has less to lose from the dispute. However, a spot of weakness in the dollar indicated that worries over trade tensions have eased as the tariffs were seen to be at lower levels than some had feared.

The dollar index was hovering near a seven-week low against a basket of major currencies.

Gold has declined about 11.6 percent from a peak in April, hurt by the intensifying U.S.-China trade dispute and on rising U.S. interest rates.

Investors are awaiting next week's Federal Reserve meeting. The U.S. central bank is widely expected to raise benchmark interest rates and shed light on the path for future rate hikes.

"Recent Fed commentary has implied a steady pace of tightening so anything that calls that into question will be positive for gold," said Nicholas Frappell, global general manager, ABC Bullion, Australia.

Gold has been stuck in a range between $1,215 and $1,187 for the past three weeks, with investors looking for a breakout on either side for further moves.

"The market gives the outward appearance of remaining range-bound and hasn't yet done enough on the upside to alter this appearance. However, over short term, prices would strengthen to$1,211 and a break above could see $1,221," Frappell said.

Among other precious metals, spot silver rose 0.7 percent to $14.28 an ounce, after touching two-week highs at $14.35, early in the session. Palladium climbed 0.4 percent to $1,039.10, hovering near a five-month high of $1,041.70 hit on Wednesday.

Platinum gained 0.3 percent to $823.20, after hitting its highest since Aug. 13 at $826.40 in the previous session.

(Reporting by Nallur Sethuraman in Bengaluru; Editing by Sherry Jacob-Phillips and Subhranshu Sahu)