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Gold fell slightly in Dubai on Tuesday morning. Image Credit: Supplied

Gold prices fell on Tuesday on the back of a firmer dollar, but fears of a global economic slowdown fuelled by an intensifying U.S.-China trade war kept prices near multi-year highs.

Spot gold was down 0.5% at $1,523.26 (Dh5,594.51) per ounce at 0406 GMT, but still not far off last week’s $1,554.56, its highest level since April 2013. U.S. gold futures were up 0.2% at $1,532.20 an ounce.

In Dubai, local prices also opened down. The price for 24 carat gold stood at Dh184.50 per gram, down slightly from Dh184.75 the night before. The price for 22 carat was down similarly at Dh173.50 per gram.

The stronger dollar is weighing on gold prices, Phillip Futures analyst Benjamin Lu said, adding that investors are waiting on the U.S. manufacturing survey by the Institute for Supply Management (ISM) for some forward guidance on U.S.

economic conditions.

“Better than expected ISM result can give some weakness to gold prices on an intraday basis,” Lu said.

The dollar index, which measures the greenback against a basket of six major currencies, was up 0.4%, having climbed to a more than two-year high. A firmer dollar makes bullion costlier for investors holding other currencies.

Meanwhile, Asian stocks on Tuesday were dented by U.S.-China trade frictions.

Overall risk sentiment was poor and the trade war was likely to create more volatility, benefiting gold, Lu said.

China has lodged a complaint against the United States at the World Trade Organization over U.S. import duties, trashing the latest tariff actions as violating the consensus reached by leaders of China and the United States in a meeting in Osaka.

A new round of tit-for-tat tariffs came in effect on Sunday and although U.S. President Donald Trump has said both sides would still meet for talks later this month, tensions have shown little sign of abating.

Also keeping investors on edge were uncertainties over Brexit with Prime Minister Boris Johnson indicating he could call an election to block lawmakers’ efforts to avert a no-deal Brexit.

“I think markets are still structurally bullish, with consistent bearish headlines fuelling gold’s climb,” said Howie Lee, economist at OCBC Bank “I won’t be surprised if gold breaks above $1,600/oz before this year ends.” Gold rose more than $100, or about 7%, in August due to the trade war, fears of a global economic downturn, negative debt yields around the globe and hopes for interest rate cuts by central banks.

Elsewhere, silver fell 0.2% to $18.40 per ounce.

Platinum dipped 0.4% to $926.43 per ounce, while palladium was up 0.4% at $1,537.50.

(Reporting by Eileen Soreng in Bengaluru; Editing by Rashmi Aich and Richard Pullin)