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Gold prices edged higher in early Asian trading on Tuesday, helped by a softer dollar, although investors looked forward to further U.S. economic data duw this week to gauge the Federal Reserve's next policy move.

FUNDAMENTALS

* Spot gold rose 0.4% to $1,996.99 per ounce by 0037 GMT. U.S. gold futures gained 0.3% to $2,005.50.

* The dollar index was down 0.1%, making gold more attractive for buyers holding other currencies. [USD/]

* Dallas Fed's report on Monday showed manufacturing activity in Texas contracted in April, highlighting the economic toll of the Fed's rate tightening cycle.

* Although gold is considered a hedge against inflation and economic uncertainty, higher interest rates dim the non-yielding asset's appeal.

* The CME FedWatch tool shows that markets are pricing in a 90.5% chance of a 25-basis-point hike by the Fed at its May 2-3 meeting.

* Rising concerns that the U.S. Treasury Department could hit its debt limit in the coming months are leading investors to shun certain Treasury bills and pour into others as they seek out low risk places to park cash.

* Indicative of sentiment, SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, said its holdings rose 0.41% to 927.43 tonnes on Monday from 923.68 tonnes on Friday.

* Spot silver edged 0.2% higher to $25.22 per ounce, platinum rose 0.5% to $1,087.70.

* Palladium ticked 0.1% higher to $1,536.56.

DATA/EVENTS (GMT)

0500 Japan Chain Store Sales YY March

1000 UK CBI Business Optimism Q2

1400 US Consumer Confidence April

1400 US New Home Sales-Units March