PRECIOUS-Gold crawls higher on Middle East tensions; dollar rally caps gains

* Dollar climbs to a five-week peak
* SPDR Gold holdings fall 0.25% on Tuesday
* Spot gold neutral in $1,412-$1,427/oz range - techs
* Platinum hits over two-month high

(Updates prices)
By Brijesh Patel and Harshith Aranya
July 24 (Reuters) - Gold prices rose on Wednesday as
escalating tensions in the Middle East drove investors towards
the safe-haven metal, while reports of progress in Sino-U.S.
trade negotiations, and a stronger dollar limited the metal's
gain.
Spot gold XAU= was up 0.3% at $1,421.16 per ounce as of
0717 GMT, after hitting its lowest since July 17 at $1,413.80 in
the previous session.
U.S. gold futures GCv1 were steady at $1,421.50 an ounce.
"We have geopolitical tensions in Iran, and also we remain
very cautious and sceptical about the (U.S.-China) trade
negotiations expected to begin next Monday, because plenty of
things remain unsolved between the two nations," said Margaret
Yang Yan, a market analyst at CMC Markets.
"On the other side, the dollar index is rallying which is
having a negative impact on gold prices."
Uncertainty in the Middle East continued as a U.S. Navy ship
took defensive action against a second Iranian drone in the
Strait of Hormuz last week, but did not see the drone go into
the water, the U.S. military said on Tuesday. On the trade front, a report said U.S. Trade Representative
Robert Lighthizer would travel to Shanghai next week for
meetings with Chinese officials to hammer out a deal to end the
long-drawn trade tussle between the world's top two economies.
The dollar index .DXY extended gains to a five-week high,
making gold expensive for holders of other currencies. USD/
The European Central Bank is likely to at least offer a nod
to easier policy at its meeting on Thursday, while the U.S.
central bank is widely expected to lower interest rate at its
meeting ending July 31.
Futures FEDWATCH remain 100% priced for a rate cut of 25
basis points (bps) from the Federal Reserve next week, and even
imply an 18% chance of 50 basis points.
"If the Fed does a 25 bp rate cut next week, I don't think
gold prices will feel any stronger as it has been already priced
in," said Howie Lee, economist, OCBC Bank.
"But if the Fed surprises with a 50 bp cut, that might push
gold prices to test the $1,450 level."
Meanwhile, holdings of SPDR Gold Trust GLD , the world's
largest gold-backed exchange-traded fund, fell 0.25% from Monday
to 823.13 tonnes on Tuesday. GOL/ETF
Spot gold looks neutral in a narrow range of $1,412-$1,427
per ounce, and an escape from the range could suggest a
direction, said Reuters technical analyst Wang Tao. Among other precious metals, silver XAG= rose 0.5% to
$16.48 per ounce, while palladium XPD= eased 0.2% to
$1,523.84.
Platinum XPT= was up 0.7% at $859.75 an ounce, after
hitting its highest since May 14 at $862.25 earlier in the
session.