By Swati Verma
BENGALURU (Reuters) - Gold prices erased early gains to trade lower on Tuesday after Chinese President Xi Jinping promised to lower import tariffs on certain products, helping soothe fears over an escalating trade row with the United States.
Xi promised to open the country's economy further and lower import tariffs on products including cars. His comments sent U.S. stock futures, the dollar and Asian shares higher.
This dampened the appeal of gold, which is priced in dollars, as investors' appetite for risky assets surged.
Spot gold was down 0.1 percent at $1,334.70 an ounce as of 0727 GMT, having risen to a near one-week high of $1,338.12 earlier in the session.
U.S. gold futures dropped 0.2 percent to $1,337.80 an ounce.
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"The risk-aversion demand in the past few weeks has been very positive for gold, but I don't think what President Xi has been saying is going to affect gold that much… we will have to wait for U.S. President Donald Trump, he is a bit unpredictable," said Mark To, head of research, Hong Kong's Wing Fung Financial Group.
Gold is often seen as an alternative investment during times of political and financial uncertainty.
"What is happening now in Syria and Trump's reaction to that will have a more direct impact on gold prices than Xi's speech, which is being viewed as a very rational long-term strategy for China," To added.
Trump on Monday promised quick, forceful action in response to a deadly suspected chemical weapons attack in Syria, appearing to suggest a potential military response.
"We do not expect trade tensions between the United States and China to escalate into a trade war," ABN Amro analyst Georgette Boele said in a note on Monday, adding that gold prices could drop below the $1,300 per ounce level in the coming weeks.
"A U.S. dollar recovery in an environment of lower trade and political tensions combined with Fed rate hikes should be responsible for such weakness."
Markets are looking ahead to this week's Federal Reserve's minutes on its last policy meeting and U.S. CPI data for cues on the pace of interest rate hikes this year.
In other precious metals, silver gained 0.2 percent to $16.48 an ounce.
Platinum climbed 0.2 percent to $933.45 an ounce, after gaining about 2 percent in the previous session, the most in nearly two months.
Palladium rose 0.4 percent to $933 an ounce. The auto catalyst metal gained over 3 percent on Monday, its daily biggest percentage rise since Jan. 12.
(Reporting by Swati Verma and Eileen Soreng in Bengaluru; Editing by Subhranshu Sahu and Sherry Jacob-Phillips)