Gold prices steady as dollar sags on U.S-Mexico trade deal

BENGALURU (Reuters) - Gold prices held steady on Tuesday after hitting a two-week high in the previous session, with the dollar under pressure in the wake of a trade deal between the United States and Mexico.

FUNDAMENTALS

* Spot gold was steady at $1,211.31 an ounce at 0047 GMT. Prices hit their highest since Aug. 13 at $1,212.38 on Monday, while the metal rose about 1.7 percent on Friday in its biggest one-day percentage gain since May 17, 2017.

* U.S. gold futures were up 0.2 percent at $1,217.90 an ounce.

* The dollar fell to a four-week low on Monday, as risk appetite improved and investors unwound some safe-haven bets on the currency after the United States and Mexico reached a trade deal. [USD/]

* The dollar index slid 0.1 percent against a basket of six major currencies on Tuesday.

* The United States and Mexico agreed to overhaul the North American Free Trade Agreement (NAFTA), putting pressure on Canada to agree to the new terms on auto trade and other issues to remain part of the three-nation pact. An agreement could ease concerns about an escalation in global trade tensions.

* The dollar was also undermined by expectations of a more gradual pace in the U.S. interest rate increases.

* Interest rate hike expectations have supported the dollar this year as the U.S. economy tracked a stable growth path.

* However, since hitting a more than one-year high in mid-August, the dollar has fallen about 2.3 percent after President Donald Trump criticized the Fed for raising interest rates at a time when the government was trying to stimulate the economy.

* China's net gold imports via main conduit Hong Kong fell about 45 percent in July from the previous month amid lacklustre demand, data showed on Monday.

* Higher activity in gold options amid geopolitical tensions and a record-long bull market for U.S. equities suggest that investors are betting gold prices have found a floor, traders said.

(Reporting by Nallur Sethuraman in Bengaluru; Editing by Joseph Radford)