PRECIOUS-Gold firms as trade worries sour risk appetite; dollar caps gains

* SPDR gold holdings fell to 737.34 tonnes on Tuesday
* Dollar gaining preference as safe-haven over gold -
analyst

(Updates prices)
By Arijit Bose
May 29 (Reuters) - Gold prices firmed on Wednesday as signs
of an escalating trade war made investors risk averse, but a
buoyant dollar capped the metal's upside.
Spot gold XAU= was up 0.2% at $1,281.59 per ounce, as of
0607 GMT. In the previous session, the metal slipped from a
1-week peak of $1,287.32 hit on Monday but bounced off a support
at around $1,275.
U.S. gold futures GCcv1 were up 0.3% at $1,280.80 an
ounce.
Safe-haven assets were seen in demand as investors fretted
over the global growth outlook after a report by the People's
Daily newspaper that Beijing was ready to use rare earths for
leverage in its trade war with the United States. U.S. President Donald Trump said in a news conference with
Japanese Prime Minister Shinzo Abe on Monday that he was "not
ready to make a deal with China," which came as a fresh blow to
hopes of a resolution in the trade war between the world's two
largest economies. "While we are seeing some safe-haven buying of gold, it has
certainly been muted. The dollar is gaining preference as a
safe-haven asset here," ANZ analyst Daniel Hynes said.
Despite U.S. 10-year Treasury yields being at their lowest
since September 2017, the dollar .DXY has managed to maintain
its composure as investors flocked towards the U.S. currency on
fears that the Sino-U.S. trade war may aggravate. USD/
The Trump administration also said on Tuesday that no major
trading partner met its currency manipulation criteria but nine
countries, including China, required close attention as
Washington presses tariffs and negotiations to address trade
deficits. The dollar is now mimicking its characteristics from last
year when its continued strength pressured bullion since the
start of retaliatory tariff impositions by the two greatest
economies in the world.
"Wider global interest rate differentials between the U.S.
dollar and G-6 currencies have further bolstered the U.S. dollar
strength whilst extending marked pressure on gold in lieu of its
status as a non-interest bearing asset," a Phillip Futures note
said.
"The yellow metal looks poised to deliver for range-bound
conditions as traders pivot between a strong dollar and existing
market risks."
Holdings of SPDR Gold Trust GLD , the world's largest
gold-backed exchange-traded fund, which is a gauge of investor
interest in the metal, fell 0.2% to 737.34 tonnes on Tuesday
from Friday. GOL/ETF
Among other precious metals, spot palladium XPD= was up
0.7% at $1,345.15 an ounce.
Silver XAG= gained 0.3% to $14.39 an ounce, having hit its
lowest since Dec. 3 at $14.25 in the previous session, while
platinum XPT= rose 0.3% to $798.11.