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By Arijit Bose
Gold eased on Tuesday after touching a more than two-week low in the previous session, as increasing bets that the U.S. Federal Reserve will not cut interest rates this year boosted the dollar which usurped bullion's safe-haven appeal.
Spot gold fell 0.2% to $1,275.61 per ounce at 0334 GMT. Last session, gold dipped to a more than two-week trough of $1,273.22.
U.S. gold futures also eased 0.2% to $1,275.20 an ounce.
The dollar held near a 2-1/2-week high on Tuesday, supported by higher U.S.-yields and as intensifying trade frictions between the United States and China boosted appetite for the safe-haven greenback.
"The dollar strength is starting to re-emerge because the Fed really hasn't been as dovish as market participants are looking for," said David Song, an analyst at DailyFX.
"As long as the data continues to come broadly in line with what the Fed is looking for, we are watching a theme right now where the Fed is really reluctant to conclude their hiking cycle."
Fed Chair Jerome Powell said on Monday it was "premature" to ascertain the impacts of trade and tariff on the trajectory of monetary policy instead enunciating that recent economic data pointed towards a healthy supply side.
Elsewhere, Asian shares wobbled near four-month lows on mounting worries the White House's black-listing of Chinese telecom giant Huawei could further inflame already tense relations between the United States and China.
Gold, which is generally considered a safe-haven asset, has shrugged most news of escalating tensions, much to the bulls' dismay, analysts said.
Analysts said now the dollar has started to mimic its characteristics from last year when it was preferred over gold by investors looking to hedge against a simmering trade war.
Beijing on Monday accused Washington of harbouring "extravagant expectations" for a deal to end their stretched trade dispute, sparking worries that the two countries were digging for a longer, costlier trade war.
"Gold's lack of momentum despite an escalating trade war, raised concerns about stability in the Middle East, recent stock market gyrations and bond yields near an 18-month low have left potential investors frustrated and sidelined," Saxo Bank commodity strategist Ole Hansen said in a note on Monday.
"The currency market is potentially posing the biggest short-term challenge with the dollar increasingly behaving as the only safe haven at this stage."
Markets now await the Fed minutes due on Wednesday, which will provide insights into the May 1 meeting by the central bank.
Among other precious metals, silver fell 0.2% to $14.44 an ounce, closing in on a more than five-month low of $14.33 touched in the previous session.
Platinum dipped 0.2% to $809.80, after hitting a two-month low of $805.50 last session, while palladium rose 0.2% to $1,331.35.
(Reporting by Arijit Bose in Bengaluru; Editing by Rashmi Aich)