Gold prices held firm near six-year highs on Tuesday as investors flocked to safety after the United States designated Beijing a currency manipulator, escalating a protracted trade war between the world's two biggest economies.
Spot gold was down 0.1% at $1,461.51 per ounce as of 0543 GMT after hitting its highest level since May 2013, at $1,474.81, earlier in the session.
U.S. gold futures were also down 0.1%, at $1,474.40 an ounce.
“There have been comments that China is going to use its currency tool a bit more, because they are beginning to lose their trade deal with the U.S.," said John Sharma, an economist with National Australia Bank.
U.S. Treasury Secretary Steven Mnuchin said on Monday the government had determined that Beijing was manipulating its currency, and Washington would engage with the International Monetary Fund to “to eliminate the unfair competitive advantage created by China's latest actions".
This comes after China allowed its yuan to weaken past the key 7-per-dollar level for the first time in more than a decade, following Washington's decision to impose 10% tariffs on $300 billion of Chinese imports, ending a month-long trade truce.
Helping gold's momentum, the dollar index slipped to a two-week low, while U.S. longer-dated Treasury yields posted their biggest fall in 14 months.
Gold may have moved too quickly relative to the dollar, wrote Stephen Innes, managing partner, Vanguard Markets, in a note.
“We may be entering a period of consolidation where an opportunity to reengage gold positions at much better levels might present itself," Innes added.
The fresh escalations in the protracted trade war between the U.S. and China rattled financial markets around the world, driving investors towards safe-haven assets.
“The market sell-off could still see another major push lower and that will likely be the catalyst to take gold above $1,500 an ounce," Edward Moya, senior market analyst at OANDA, said.
Indicative of sentiment, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.53% to 835.16 tonnes on Monday from Friday.
Meanwhile, gold priced in sterling soared to a record high on Monday, spurred by fear of a disorderly British exit from the European Union amidst trade tensions.
On the technical side, spot gold may fall into a range of $1,441-$1,449 per ounce, according to Reuters technical analyst Wang Tao.
Among other precious metals, silver was steady at $16.39 per ounce, while platinum rose 0.2% to $854.85.
Palladium climbed 1.3% to $1,432.75 an ounce.