BENGALURU - Gold prices edged up on Friday to a one-week high as the dollar weakened on receding fears of a full-blown Sino-U.S. trade war, keeping the yellow metal on track for its first weekly gain in four.
Spot gold added 0.1 percent to $1,208.0 by 0252 GMT, after touching its highest since Sept. 13 at $1,210.01. It has risen 1.3 percent so far this week.
U.S. gold futures were up 0.1 percent at $1,212.70 an ounce.
"Higher gold prices are due to the fact that China-U.S. trade tensions have somewhat dissipitated," OCBC analyst Barnabas Gan said.
"Right now we have to tread very carefully on gold as any uptick in trade tension is bearish. U.S. tariffs should actually improve trade balance in the U.S and should give more strength to the dollar and push gold prices down."
New U.S. and Chinese tariffs on each other's goods were set at lower rates this week than previously expected, raising hopes that hostilities between the world's two largest economies may be easing.
Investors have been buying the dollar believing that the United States has less to lose from the dispute. But the dollar has weakened this week, with investor flows being diverted away from the greenback to its peers such as emerging market currencies as trade war concerns have ebbed.
The dollar index was hovering near a 10-week low against a basket of major currencies.
Gold has declined about 11.6 percent from a peak in April, hurt by the intensifying U.S.-China trade dispute and on rising U.S. interest rates.
Investors are awaiting next week's Federal Reserve meeting. The U.S. central bank is widely expected to raise benchmark interest rates and shed light on the path for future rate hikes.
Markets are pretty much already positioned in anticipation of U.S. rate hikes, analysts said.
"There are some underlying questions over what the outlook towards U.S. monetary policy in 2019 could be," said Jameel Ahmad, global head of currency strategy and market research at FXTM.
"But due to the other external uncertainties in the atmosphere including and not limited to trade tensions and a U.S. mid-term election within two months, it is possible that investors will be prepared to give the Fed more time."
Among other precious metals, spot silver rose 0.6 percent to $14.35, after rising to two-week highs of $14.387.
Palladium touched its highest since April 19 at $1,054.80 per ounce on Thursday. It was last down 0.1 percent at $1,048.50.
Platinum hit its highest since Aug. 9 at $836.40.
(Reporting by Nallur Sethuraman in Bengaluru; Editing by Amrutha Gayathri and Richard Pullin) ((Sethuraman.NR@thomsonreuters.com; (Within U.S. 1-651-848-5832, Outside U.S. +91 8067496031); Reuters Messaging: firstname.lastname@example.org))