* Three month target for gold at $1,275-Julius Baer

* Palladium marks 3-month high; platinum hits over one-monthpeak

* SPDR Gold holdings fell 0.3 tonne Tuesday

(Updates throughout)

By Eric Onstad

LONDON, Sept 19 (Reuters) - Bullion bounced on Wednesday asthe dollar weakened, indicating investors are starting to worryabout the impact of the U.S.-China trade war on the U.S.economy, luring some buyers back into gold investments.

Spot gold XAU= climbed 0.6 percent to $1,204.92 an ounceby 1235 GMT after going into the red on Tuesday.

U.S. futures GCcv1 were up 0.4 percent at $1,208 an ounce.

"It appears that investors are beginning to view tariffs -while likely negative for China's exports - could also provedetrimental to the United States as well, given the disruptiveimpact on global supply chains," National Australia Bankeconomist John Sharma said.

China said on Wednesday it will not stoop to competitivedevaluation of its currency, hours after it hit back with asofter punch than the one landed by the United States in anescalating tariff dispute. urn:newsml:reuters.com:*:nL3N1W52DM

Gold prices have declined about 12 percent since April, hurtby the intensifying dispute and on rising U.S. interest rateswith investors buying the dollar in the belief the United Stateshas less to lose from the dispute.

The dollar index .DXY , which measures the greenbackagainst a basket of major currencies was slightly weaker. USD/

While a strong U.S. economy, rising U.S. interest rates andthe rumbling trade dispute may weigh on gold in coming weeks,the market has bottomed out and the long-term direction is up,Julius Baer's head of commodity research Norbert Ruecker said.

Julius Baer has targeted gold to climb to $1,275 in threemonths and $1,375 in 12 months.

"Somehow the commodity markets have learned to ignore thetrade war, but there will be more noise from this theme, so itremains an uncertain element," Ruecker said.

"Overall, we are constructive for gold and we are tellingour clients to start to build a long-term position. Negativesentiment and positioning looks like it has hit rock bottom, sothis will start normalising and support gold," he said.

Among other precious metals, spot silver XAG= rose 0.8percent to $14.24 an ounce.

Platinum XPT= gained 1.5 percent to $821.80, after hittingits highest since Aug. 13 at $822.80 during the session.

Palladium XPD= added 1.6 percent at $1,025.60, aftermarking its highest since June 7 at $1,027.72.

"Used chiefly in the auto industry, palladium profited alsofrom the relief rally enjoyed by base metals. Because platinumhardy kept pace at all, the price gap between palladium andplatinum widened," Commerzbank said in a note.

The spread between the two metals has increased to $204 from$176 a week ago.

(Additional reporting by Vijaykumar Vedala and NallurSethuraman in BENGALURU, editing by Alexandra Hudson) ((eric.onstad@thomsonreuters.com; +44 20 7542 7093; Twitter https://twitter.com/reutersEricO ; Reuters Messaging: eric.onstad.thomsonreuters.com@reuters.net))