Bengaluru — Gold prices gained early on Monday on a weaker dollar as a trade ceasefire between the US and China revived investor demand for riskier assets.

Washington and Beijing agreed to halt additional tariffs in a deal that keeps their trade war from escalating as the two sides try again to bridge their differences with fresh talks aimed at reaching an agreement within 90 days.

Spot gold was up 0.3% at $1,225.67/oz at 4.07am GMT, while US gold futures were up 0.4% at $1,230.40/oz.

“There’s a little bit weaker dollar that seems to be the driving factor for gold,” said Stephen Innes, Asia-Pacific trading head at Oanda in Singapore, adding that the risk-on environment was, however, holding back gains.

The dollar index, which measures the greenback against a basket of six major currencies, was down about 0.3%.

The US currency has been the preferred safe haven this year as the US-China trade war unfolded against a backdrop of higher US interest rates, denting the bullion’s appeal.

However, the greenback came under pressure last week after Federal Reserve chair Jerome Powell said interest rates are just below neutral, raising the expectation that the US central bank is closer to the end of its rate hike cycle.

Gold tends to gain when rate hike expectations recede because lower rates reduce the opportunity cost of holding non-yielding bullion. Lower interest rates also tend to weigh on US yields and the dollar, in which gold is priced.

If the Fed is worried about growth and makes it known more clearly, then the market could possibly see a further boost to gold, said John Sharma, an economist with National Australia Bank (NAB).

Powell is scheduled to testify before a congressional joint economic committee later this week.

Analysts expect the metal to be supported in the near term on political and economic risks such as uncertainties over Brexit and Italy’s budget, and the recent unrest in Paris.

Meanwhile, Asian shares rallied with MSCI’s broadest index of Asia-Pacific shares outside Japan up 1.8%.

Among other precious metals, palladium rose nearly 1% to $1,187.90/oz, after having crossed the $1,200 mark for the first time on Friday.

Spot silver was up 1.1% at $14.32/oz, while platinum climbed 1.8% to $811.90/oz.

Speculators increased their net short position in gold by 8,464 contracts to 51,828 contracts in the week to November 27, the US Commodity Futures Trading Commission (CFTC) said on Friday.