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·         Gold on Monday held close to 5-1/2-month lows, with a strong dollar offsetting the upward influence of an escalating trade dispute between the United States and China.

·         Spot gold prices were hemmed in a tight trading range after Friday's selloff because of competing pressure and support on Monday, forcing investors to reassess their positions, said Phillip Streible, senior commodities strategist at RJO Futures.

·         "We saw such an excessive washout on Friday. Speculators are reassessing their positions and consolidating for about 48 hours until we get news to wash the market," Streible said.

"U.S.-China trade dispute affected a whole bunch of physical commodities ... Definitely we have a trade war going over now...that will have a spillover on the gold market."

·         Spot gold was flat at $1,278.18 an ounce by 1:33 p.m. EDT (1733 GMT), while U.S. gold futures for August delivery settled up $1.60, or 0.1 percent, at $1,280.10 per ounce.

·         The stronger dollar dampens demand for gold by making it costlier for buyers holding other currencies, while geopolitical uncertainty fuels interest in bullion as a safe investment.

·         The dollar was slightly firmer and near its strongest since November against a basket of currencies . Gold plunged 1.8 percent on Friday, its biggest one-day fall since November 2016, despite Washington deciding to enact tariffs on $50 billion in Chinese goods. Markets fear a trade war could damage global growth.

·         World stocks fell on Friday and Monday. Gold would remain sensitive to trade dispute headlines and the possibility that a showdown over immigration between German Chancellor Angela Merkel and her conservative allies, the Christian Social Union, could escalate, said Saxo Bank analyst Ole Hansen.

·         "The market is also ignoring the political risks in Germany," said analysts at Commerzbank. "A lack of consensus on refugee policy could even cause a split in the government."

·         As long as gold continued to trade below its 200-day moving average at $1,307 prices were more likely to fall than rise, analysts at ScotiaMocatta said.

·         Reuters technical analyst Wang Tao said gold could break support at $1,277 an ounce and fall towards $1,258-$1,268.

·         Meanwhile, silver lost 0.4 percent at $16.45 an ounce after falling 3.6 percent on Friday. Silver sunk to $16.39, its lowest in almost two weeks.

Platinum declined 0.5 percent at $883.40 an ounce, dropping to a four-week low, $877.65.

Palladium was down 0.2 percent at $988.30 an ounce, declining to $979.99, its lowest since June 5.

Reference: Kitco