* SPDR gold holdings fell to 737.34 tonnes on Tuesday
* Dollar gaining preference as safe-haven over gold - analyst (Updates prices)
By Arijit Bose
May 29 (Reuters) - Gold prices firmed on Wednesday as signs of an escalating trade war made investors risk averse, but a buoyant dollar capped the metal's upside.
Spot gold XAU= was up 0.2% at $1,281.59 per ounce, as of 0607 GMT. In the previous session, the metal slipped from a 1-week peak of $1,287.32 hit on Monday but bounced off a support at around $1,275.
U.S. gold futures GCcv1 were up 0.3% at $1,280.80 an ounce.
Safe-haven assets were seen in demand as investors fretted over the global growth outlook after a report by the People's Daily newspaper that Beijing was ready to use rare earths for leverage in its trade war with the United States. President Donald Trump said in a news conference with Japanese Prime Minister Shinzo Abe on Monday that he was "not ready to make a deal with China," which came as a fresh blow to hopes of a resolution in the trade war between the world's two largest economies. we are seeing some safe-haven buying of gold, it has certainly been muted. The dollar is gaining preference as a safe-haven asset here," ANZ analyst Daniel Hynes said.
Despite U.S. 10-year Treasury yields being at their lowest since September 2017, the dollar .DXY has managed to maintain its composure as investors flocked towards the U.S. currency on fears that the Sino-U.S. trade war may aggravate. USD/
The Trump administration also said on Tuesday that no major trading partner met its currency manipulation criteria but nine countries, including China, required close attention as Washington presses tariffs and negotiations to address trade deficits. dollar is now mimicking its characteristics from last year when its continued strength pressured bullion since the start of retaliatory tariff impositions by the two greatest economies in the world.
"Wider global interest rate differentials between the U.S. dollar and G-6 currencies have further bolstered the U.S. dollar strength whilst extending marked pressure on gold in lieu of its status as a non-interest bearing asset," a Phillip Futures note said.
"The yellow metal looks poised to deliver for range-bound conditions as traders pivot between a strong dollar and existing market risks."
Holdings of SPDR Gold Trust GLD , the world's largest gold-backed exchange-traded fund, which is a gauge of investor interest in the metal, fell 0.2% to 737.34 tonnes on Tuesday from Friday. GOL/ETF
Among other precious metals, spot palladium XPD= was up 0.7% at $1,345.15 an ounce.
Silver XAG= gained 0.3% to $14.39 an ounce, having hit its lowest since Dec. 3 at $14.25 in the previous session, while platinum XPT= rose 0.3% to $798.11.