Gold hit its highest in nearly a week on Thursday as the dollar slumped, its safe-haven appeal lessened by fading fears over Sino-U.S. trade tensions and as investors opted for assets perceived as more risky, like stocks.
The dollar hit a nine-week low against a basket of major currencies, while world stocks bounced up amid continued relief that fresh U.S. and Chinese tariffs on reciprocal imports were less harsh than originally feared.
"America is killing itself with these trade tariffs. (They) actually hit America far harder than (they) hit China. The idea that the dollar is all mighty and going to continue to rise is not true," said Alasdair Macleod, head of research at GoldMoney.com.
"Gold traders are sitting on short positions (but) if the dollar comes down another notch or two, shorts in gold will start to panic. When gold starts moving, it (could) start moving very sharply (higher)."
A weak dollar makes dollar-priced gold cheaper for non-U.S. investors.
Spot gold was up 0.2 percent at $1,206.36, having hit its highest since last Thursday at $1,207.83.
U.S. gold futures were up 0.2 percent at $1,211 an ounce.
Investors have been buying the dollar and selling gold in recent months believing the United States has less to lose from a trade dispute than China. But they may be losing faith in the ability of the U.S. economy to withstand a trade war with China.
A new Reuters poll showed unanimous agreement that a trade war with China was bad economic policy for the United States, predicting U.S. growth would slow to 2.0 percent in the fourth quarter, less than half the last reported rate of 4.2 percent.
Gold has declined around 12 percent from a peak in April amid the intensifying U.S.-China trade dispute, the dollar rally and rising U.S. interest rates.
Investors are waiting for what is expected to be a hawkish meeting of the U.S. Federal Reserve next week, where the central bank is widely expected to raise benchmark interest rates.
Platinum gained 1.4 percent to $832, after hitting its highest since mid-August at $829.50 in the previous session.