PRECIOUS-Gold steadies after hitting near 3-month peak on rate cut hopes

* Fed Chair Powell opens door to the possibility of rate cut
* GLD fund posts biggest one-day percentage gain since
mid-2016
* Silver hits three-week peak

(Adds comments, details, updates prices)
By Diptendu Lahiri
June 4 (Reuters) - Gold steadied below a three-month peak on
Tuesday on news China was open to negotiating its trade dispute
with the United States, while rising expectations the U.S.
Federal Reserve will cut interest rates provided underlying
support.
China's commerce ministry on Tuesday urged dialogue and
negotiation to resolve the trade differences, which have roiled
financial markets. Spot gold XAU= eased 0.1% to $1,324.01 per ounce as of
1:43 p.m. EDT (1743 GMT), after touching its highest since Feb.
27 at $1,328.98 earlier in the session. U.S. gold futures
GCcv1 settled up 0.1% at $1,328.70 per ounce.
"Headlines have come up saying U.S.-China trade dispute can
be negotiated over talks which is pushing gold down," said
Afshin Nabavi, senior vice president at MKS SA.
"The metal will seek support at around $1,316 and we will
mostly see it going up again from there."
Gold prices were also pressured by a rally in equities
after Fed Chair Jerome Powell said the central bank would act
"as appropriate" in the face of trade war risks, leaving the
door open for a possible rate cut. .N Wall Street's main indexes have shed more than 6% in May on
fears of a recession as U.S.-China trade tensions showed little
signs of easing.
"Investors are exiting the safe-haven asset at a higher
price and putting their money in equities, which is gaining
today," said Jeffrey Sica, founder of Circle Squared Alternative
Investments.
"The rise in the equities market is actually overpowering
the effect of Powell's comment on rate cuts," Sica added.
Meanwhile, gold has climbed over 4% since hitting a one-week
low of $1,274.44 an ounce last week, mainly on the back of
escalating trade tensions and expectations the Fed would cut
rates to offset the impact of the U.S.-China trade war.
"The likelihood of economic and equity markets turmoil will
support gold, as it will trigger safe-haven inflows, force the
Fed to cut rates and cap U.S. dollar's upside," Societe Generale
said in a note.
Lower interest rates cut the opportunity cost of holding
non-yielding commodities, while gold also tends to benefit from
growth concerns as an alternative to cyclical assets like
stocks.
Reflecting increased investor interest in bullion, holdings
of SPDR Gold Trust GLD , the world's largest gold-backed
exchange-traded fund, rose 2.2% on Monday, its biggest one-day
percentage gain since July 2016. GOL/ETF
Elsewhere, silver XAG= rose 0.1% to $14.79 per ounce,
after touching a three-week high of $14.84 in the session.
Platinum XPT= fell 0.2% to $818.75 per ounce after hitting
a more than two-week high of $825.78. The metal had marked its
biggest intraday percentage gain in 2-1/2 years on Monday.
Palladium XPD= jumped 1.6% to $1,344.15 per ounce.