PRECIOUS-Gold recovers as U.S.-China trade jitters sour risk appetite

* Palladium off 6-week high
* U.S. CPI data for May due at 1230 GMT
* GRAPHIC - 2019 asset returns: http://tmsnrt.rs/2jvdmXl

(Updates prices)
By Arijit Bose
June 12 (Reuters) - Gold prices rose on Wednesday after
hitting a one-week low in the previous session, as worries over
U.S.-China trade war flared up, curbing risk appetite and
increasing the appeal of safe-haven bullion.
Spot gold XAU= was up 0.7% at $1,335.34, as of 0724 GMT,
after falling to its lowest since June 3 at $1,319.35 in the
previous session.
U.S. gold futures GCv1 were up 0.6% at $1,339 an ounce.
"Market sentiment this morning is very cautious and risk
appetite has started to diminish gently, therefore we see a
little bit of buying in gold," said Benjamin Lu, an analyst with
Singapore-based Phillip Futures.
Asian stock markets drifted lower as both warring factions
in the Sino-U.S. trade tussle engaged in another round of heated
exchanges. MKTS/GLOB
U.S. President Donald Trump defended the use of tariffs as
part of his trade strategy, while China vowed a tough response
if Washington insists on escalating trade tensions amid ongoing
negotiations. Trump also emphasised that he was holding up a trade deal
with China and had no interest in moving ahead unless Beijing
agrees again to four or five "major points," which he did not
specify. "Gold remains bid as the main dispute between U.S. and China
remains unresolved. If there is no sit down between leaders at
the G20 meeting, the metal will rise as investors will be on the
lookout for a safe haven," Alfonso Esparza, a senior market
analyst at OANDA, said in a note.
Sources said there has been a lack of preparatory work for
the meeting, due largely to the increasing acrimony. The trade
negotiating teams have not met since talks ended in stalemate on
May 10. Gold bulls are also optimistic of an interest rate cut by
the U.S. Federal Reserve. Trump, a long-term advocator of rate
cuts, said on Tuesday interest rates were "way too high" and the
central bank had "no clue".
Fed policymakers will meet on June 18-19 against the
backdrop of rising trade tensions, slowing U.S. growth and a
sharp step-down in hiring last month that have led markets to
price in at least two rate cuts by the end of 2019.
Also in focus are the May U.S. consumer price data, due at
1230 GMT. Headline inflation is expected to slow a touch to
1.9%, with core seen steady at 2.1%.
Last week, gold registered its biggest weekly gain of 2019
and rose to a 14-month peak of $1,348.08, before losing momentum
due to a deal between the United States and Mexico to avert yet
another trade spat.
Capping gains, this rally in gold prices offered an
opportunity for some traders to book profits, Lu added.
Holdings of SPDR Gold Trust GLD , the world's largest
gold-backed exchange-traded fund, fell marginally to 756.18
tonnes on Tuesday from 756.42 tonnes on Monday. GOL/ETF
Among other metals, silver XAG= rose 1% to $14.85 per
ounce, while platinum XPT= climbed 0.7% to $817.80 per ounce.
Palladium XPD= fell 0.3% to $1,389.75 per ounce, off a
six-week high of $1,400.50 touched in the previous session.