London — Gold dipped on Tuesday even though the dollar remained flat against a basket of currencies, with investors concerned the greenback could resume its rally amid looming interest rate increases and escalating China-US trade tensions.

Since its April peak, gold has dropped more than 12%, losing its safe-haven status to the dollar, a strengthening of which makes gold costlier for non-US investors. Thishas prompted investors to raise their bearish bets on Comex gold and liquidate exchange-traded gold funds.

"[There's] a generally strong dollar backdrop, which is keeping the precious metal under pressure. The market is very short gold futures," said ICBC Standard Bank analyst Marcus Garvey. He added, however, that financial positions are becoming so short t would not take much of a surprise to spark a short-covering rally. "There's a good chance gold recovers back to $1,200 and possibly a bit higher." 

Spot gold dipped 0.2% to $1,192.86 an ounce at 10.06am GMT while US gold futures dipped 0.1% to $1,198.50.

The dollar was flat against a currency basket, with the euro underpinned by easing concerns over Italian debt and the pound near five-week highs on hopes of a Brexit deal with the EU.

Underpinning the dollar, however, US President Donald Trump raised trade tensions on Friday by saying he is ready to impose tariffs on virtually all Chinese imports to the US. Furthermore, US payrolls data last week cemented expectations that the Federal Reserve will raise US interest rates in September. This would be the third increase this year, with expectations of another in December.

Higher interest rates increase bond yields, making non-yielding bullion less attractive.

Gold is finding strong resistance at $1,200, with investors selling into any rallies that threaten to push it above that level, ANZ analysts said in a research note. Physical gold buying waned slightly in Asia this week as investors waited to see if prices would fall further, traders said.

In other precious metals, silver fell 0.3% to $14.09 an ounce, platinum firmed by 0.4% to $785.90, and palladium was down 0.6% at $969.55 after hitting its highest in nearly 12 weeks at $991.15.