* Reports China and U.S. quietly working to avoid trade war
* Dollar recovers versus currency basket
* Trump expels 60 Russian diplomats from United States
(Updates prices, recasts) LONDON, March 27 (Reuters) - Gold fell on Tuesday after hitting a near six-week high as risk appetite revived in global financial markets, but the precious metal remained underpinned Stock markets jumped in response to reports the United States and China were negotiating to avert a trade war and this dented the appeal of gold, seen as a safe haven. Also weighing on gold, the dollar rose versus a currency basket, though it was not far off a five-week low hit earlier as returning risk appetite dented investor appetite for the U.S. currency. A stronger dollar makes dollar-priced gold costlier for non-U.S. investors. "There's going to be a few months of talks before uncertainty around the global trade situation can be erased, and in the meantime gold will at times benefit," said Simona Gambarini, commodities economist at Capital Economics. "In the short term we definitely see gains (for gold)."
Spot gold was down 0.8 percent at $1,342.51 per ounce
at 1355 GMT, after touching $1,356.66, its highest since Feb. 16.
U.S. gold futures for April delivery fell 0.9
percent to $1,342.40 per ounce. Underpinning gold, Moscow said on Tuesday it would respond harshly to a U.S. decision to expel 60 Russian diplomats over a nerve agent attack on a former Russian spy in Britain, but was still open to strategic stability talks with Washington.
"If the political crisis (between Russia and the West) worsens, gold should remain in good demand, especially as there is also the risk of a trade war. The trade dispute is taking a backseat for the time being today, however," Commerzbank said in a note. Investors were shaken last week after U.S. President Donald Trump moved to impose tariffs on Chinese goods, sparking fears of a trade war between the world's two largest economies. China's net gold imports via main conduit Hong Kong plunged 35.5 percent in February from the previous month, data showed on Tuesday.
Holdings of SPDR Gold Trust , the world's largest
gold-backed exchange-traded fund, fell 0.38 percent to 847.30 tonnes on Monday from 850.54 tonnes on Friday.
In other precious metals, spot silver was down 0.6
percent at $16.55 per ounce after hitting a near three-week high of $16.80.
Platinum was down 0.8 percent at $943.70 per ounce, while palladium was 0.1 percent higher at $974.80.
(Additional reporting by Eileen Soreng; Editing by Dale Hudson)