PRECIOUS-Gold pares gains as bond yields climb, trade war fears lend support

By Brijesh Patel

April 8 (Reuters) - Gold pared earlier gains on Tuesday as U.S. Treasury yields rose, although a weaker dollar and escalating trade tensions between the world's two largest economies underpinned prices.

After rising as much as 1.3% earlier in the session, spot gold XAU= was up 0.1% at $2,984.16 an ounce by 2:03 p.m. ET (1803 GMT). U.S. gold futures GCcv1 settled 0.5% higher at $2,990.20.

Benchmark 10-year note yields US10YT=RR rose to a one-week high, making non-yielding gold less attractive.

"Despite falling for three consecutive sessions, gold remains bullish with trade tensions and the prospect of lower U.S. interest rates boosting its allure," said Lukman Otunuga, senior research analyst at FXTM.

"A solid breakout above $3,055 may open the doors back toward $3,100 and $3,130. Sustained weakness below $3,000 could see gold slip toward $2,950 and $2,930."

Concerns over a global trade war since U.S. President Donald Trump's announcement of reciprocal tariffs on April 2 have raised fears of a recession and prompted investors to take refuge in the safe-haven assets like gold.

The U.S. will impose a 104% tariff on China from 12:01 a.m. ET on Wednesday, a White House official said after Beijing did not lift its retaliatory tariffs on U.S. goods by a noon Tuesday deadline set by U.S. President Donald Trump.

Gold, often used as a safe store of value during times of political and financial uncertainty, has risen 15% so far this year.

Meanwhile, the dollar index .DXY fell against its rivals, making bullion less expensive for other currency holders. USD/

Investors are now looking forward to minutes from the U.S. Federal Reserve's latest policy meeting due on Wednesday for more clues on the path of rate cuts.

Traders are pricing in about 40% chance of a Fed cut in May. Zero-yield bullion tends to thrive in a low interest rate environment. FEDWATCH

"The significant rise in rate cut expectations in recent days suggest that the gold price will soon rise again," Commerzbank said in a note.

Elsewhere, spot silver XAG= fell 0.8% to $29.86 an ounce, platinum XPT= rose 0.2% to $914.83 and palladium XPD= eased 1.3% to $906.75.