* Trump initiates trade action against China
* Dollar swoons early, then rebounds
* Spot gold down, gold futures settle up (New throughout, updates prices, market activity and comments, adds second byline and NEW YORK dateline)
By Renita D. Young and Maytaal Angel
NEW YORK/LONDON, March 22 (Reuters) - Spot gold dipped on Thursday as the U.S. dollar pared losses on safe-haven buying from investors fearing a trade war between the United States and China, but gold futures rose, with one trader citing arbitrage trades.
U.S. President Donald Trump initiated trade action against China, saying the U.S. deficit with Beijing was "out of control" at about $504 billion and there was a huge "intellectual property theft situation." gold XAU= dipped 0.3 percent at $1,328.21 per ounce by 2:28 p.m. EDT (1828 GMT).
U.S. gold futures GCcv1 for April delivery settled up $5.90, or 0.5 percent, at $1,327.40 per ounce. One trader said investors were rolling from the expiring contract of April into the new front month, which is June.
"When you get close to a roll, you can see some dislocation. There are some arbitrage players who try to profit from that," said Michael Matousek, head trader at U.S. Global Investors. "It gets down to the liquidity sometimes. If you wait too late to roll, you're kind of doing yourself an injustice."
The U.S. dollar index bounced from a month low versus a currency basket. A stronger greenback makes dollar-priced gold costlier for holders of other currencies. .DXY have another rush to cash so you see crude, copper also being sold as markets weaken all around," said George Gero, managing director at RBC Wealth Management.
Some market participants still expect a rebound in gold prices.
"I know gold is down a little bit right now, but I wouldn't be surprised to see it reversed," said Chris Gaffney, president of world markets at EverBank.
Gold will likely trade within a tight range near term, traders have said, citing conflicting signals between support for bullion from geopolitical worries and pressure from strength in the U.S. economy.
Europe and U.S. equities fell as technology stocks stayed under pressure. MTKS/GLOB
"We expect the prospect of a trade war between the U.S. and other economies to put a floor under gold prices in the short term but ultimately we think that Fed tightening will prove too strong a headwind," Capital Economics analyst Simona Gambarini told the Reuters Global Metals Forum.
Meanwhile, spot silver XAG= dropped 0.7 percent at $16.41 per ounce, while platinum XPT= fell 0.5 percent at $949.40, earlier seeing a 1-week high of $963.60.
Palladium XPD= fell 0.8 percent at $982.45 per ounce, earlier hitting a 1-1/2-week low at $967.