A softer dollar and short-covering lifted gold on Monday after two sessions of declines, but investors prepared for more weakness as simmering U.S.-China trade tensions suggested the currency would stay supported.
The dollar index was down 0.4 percent at 94.50 after seeing its biggest daily rise since Aug. 23 on Friday.
"Net short (speculative) positions in gold... are still at a high level at a good 75,000 contracts... so there is further potential for short covering and therefore for higher prices from this side," Commerzbank said in a note.
China's Foreign Ministry said on Monday that the government would respond if the United States implements new tariffs, ahead of U.S. President Donald Trump's expected announcement of new duties on $200 billion in Chinese goods.
"The main issue is that this concern over trade tensions between the U.S. and China is translating into a stronger dollar, and that is weighing on gold," said Jonathan Butler, commodities analyst at Mitsubishi in London.
"I think we'll continue to see gold under pressure. As long as the dollar remains relatively well supported, yields continue to rise and the U.S. economic growth story remains in place, it's hard to see where a strong rally would come from in gold," Butler said.
Gold prices have declined more than 12 percent from April, hurt by intensifying global trade tensions and rising U.S. interest rates.
Though gold is generally presumed to be a safe-haven asset, the months-long trade rift between Washington and Beijing has prompted investors to largely opt for the U.S. dollar in the belief that the United States has less to lose from the dispute.
Among other precious metals, spot silver climbed 0.9 percent to $14.17 an ounce.
Butler said although platinum last month touched a low of $751.25 not seen since the financial crisis in 2008, the supply and demand situation was different.
"Although we're looking at a market that's in a small surplus this year, it's still a very different story from 2008, it doesn't justify platinum having a $700 handle," he said.
"Diesel is in decline, but we still have a healthy 3 million ounces or so of demand from that source this year, as opposed to 2 or 2.5 million in 2008."