PRECIOUS-Gold falls 2% as China-U.S. trade hopes hit safe-haven demand

* Dollar hits more than one-week high
* Gold breaks below $1,400 per ounce
* SPDR Gold holdings fall 0.2% on Friday
* Platinum off from six-week highs

(Updates prices)
By Sethuraman N R
July 1 (Reuters) - Gold prices fell as much as 2% on Monday
as the dollar rallied after the United States and China agreed
to restart trade talks, boosting investor appetite for riskier
assets and taking the fizz out of the precious metal's recent
rally.
Spot gold XAU= was down 1.3% at $1,391 per ounce as of
1142 GMT, after falling to its lowest since June 20 at
$1,381.51.
U.S. gold futures GCv1 dropped 1.3% to $1,394.60.
"The news that the U.S. and China agreed to restart trade
talks helped some of the risk sentiment in the market. The
dollar and bond yields are higher this morning. That's forced
some long liquidation and profit-taking in the market," said
Saxo Bank analyst Ole Hansen.
The United States and China agreed on Saturday to resume
trade negotiations after President Donald Trump offered
concessions to his Chinese counterpart Xi Jinping when the two
met at the sidelines of the G20 summit in Japan.
The dollar index .DXY jumped to a more than one-week high,
making non-interest bearing gold more expensive for holders of
other currencies. USD/
Hansen, however, was cautious.
"We are still bullish on gold. The amount of negative yield
around (the) globe is still very high. There is no major shift
in the future direction of U.S. Federal Reserve rate cuts and
there are concerns about global growth," he said, adding the
real breakthrough in trade talks was yet to come.
No deadline was set for a trade deal and much damage has
already been done, with two surveys of Chinese manufacturing
showing activity contracting. Gold prices hit a six-year high last week at $1,438.63 an
ounce, driven by a dovish outlook from major central banks and
an escalation of tensions between the United States and Iran.
While gold has shed about $50 dollars since then, some
analysts see it as a healthy correction and an opportunity to
buy.
"We do not expect gold to fall significantly further. In our
view, it is above all the upcoming European Central Bank and Fed
rate cuts, and the political risks, that argue against any
pronounced and lasting price slide," Commerzbank analysts said
in a note.
Meanwhile, holdings of the SPDR Gold Trust GLD , the
world's largest gold-backed exchange-traded fund, fell 0.22% on
Friday. Holdings had still risen nearly 7% in June as of last
week. GOL/ETF
Among other precious metals, silver XAG= fell 0.2% on
Monday to $15.29 per ounce, while palladium XPD= rose 0.5% to
$1,545.35.
Platinum XPT= gained 0.6% to $838.21 an ounce, but was off
a six-week peak touched in the previous session.