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· Gold prices ticked higher on Tuesday as brewing U.S.-China tension over Hong Kong lifted demand for the safe-haven metal, but the easing of coronavirus-induced curbs supported equities and capped further gains in bullion.

Spot gold rose 0.2% to $1,731.80 per ounce by 0523 GMT. U.S. gold futures were also down 0.2% to $1,731.80.

· "The key supportive factor for the (gold) market is rising tensions between China and the U.S., and if we see a further escalation, we would see another move higher in gold," said ING analyst Warren Patterson.

· China's foreign ministry office in Hong Kong and the city's security chief defended proposed security laws by describing some acts in mass pro-democracy protests last year as terrorism.

· The proposed legislation could lead to U.S. sanctions on Hong Kong and China, and threaten the city's status as a financial hub, White House National Security Adviser Robert O'Brien said on Sunday.

Gold is seen as a safe-haven asset during political and economic uncertainties.

· One of the factors keeping a cap on gold prices is the easing of lockdown restrictions, said Patterson, adding that, "people are getting more positive on recovery."

· Asian shares gained ground on expectations of an economic recovery and as investors focussed on more stimulus in China.

· The dollar index was down 0.2%, making gold cheaper for holders of other currencies.

· Helping risk-on sentiment, a survey showed on Monday that German business morale rebounded in May, recovering from its most dramatic fall on record the previous month.

· "As long as (gold) holds above $1,700, the bias is clearly positive," said Harshal Barot, research consultant for South Asia at Metals Focus.

· Investors are also awaiting the U.S. consumer confidence data due at 1400 GMT.

· Among other precious metals, palladium gained 1.6% to $2,023.83 per ounce, and silver rose 1.1% to $17.39. Platinum fell 0.2% to $836.45.

· Gold Price Analysis: Battle lines well-defined, can it break higher? – Confluence Detector

Gold prices have been edging higher amid an upbeat mood, which seems to favor the precious metal, contrary to past behavior. Can it continue higher? Its technical battle lines are well-defined.

The Technical Confluences Indicator is showing that fierce resistance awaits at $1,736, a convergence of lines including the Fibonacci 38.2% one-week, the Simple Moving Average 200-1h, the previous daily high, and the SMA 100-1h.

Significant support is at $1,731, which is a dense cluster of indicators such as the SMA 50-15m, the SMA 10-1h, the SMA 10-4h, the Fibonacci 61.8% one-day, the SMA 200-15m, the Bollinger Band 15min-Mlower, the SMA 50-1h, and the BB 4h-Middle.

If XAU/USD breaks above $1,736, the upside target is $1,748, which is the meeting point of the previous monthly high and the Fibonacci 61.8% one-week.

The downside target below $1,731 is $1,712, which is the confluence of the Pivot Point one-week Support 1 and the SMA 200-4h.