Gold prices rose more than 1% on Thursday, extending the previous session's sharp gains, as a weaker dollar and escalating trade tensions between the US and China prompted investors to turn to the safe-haven appeal of the precious metal.

Spot gold rose 1.6% to $3,132.29 an ounce by 9:29 a.m. ET (1329 GMT), after rising more than 3% on Wednesday. US gold futures rose 2.3% to $3,150.20.

US President Donald Trump said on Wednesday he would temporarily lower tariffs on dozens of countries, but raised tariffs on China to 125% from 104%.

"Gold is regaining its appeal as a safe haven and is back on track to hit a new all-time high," said Nikos Tzabouras, senior market analyst at Tradu.com.

"However, the prospect of a deal with trading partners poses a significant risk to gold's upside, as it could renew downward pressure on the metal. In addition, headwinds could arise from Fed rate cut bets that could strengthen the dollar."

Meanwhile, the dollar index (.DXY) , opens new tab , fell more than 1% against its rivals, making gold cheaper for holders of other currencies.

Data on Thursday showed U.S. consumer prices unexpectedly fell in March, but inflation risks are likely to rise after Trump doubled tariffs on China.

Following the data, traders bet that the U.S. Federal Reserve will continue to cut interest rates in June and may reduce its policy rate by a full percentage point by the end of the year.

"We're seeing central banks buying (gold), so as long as we see inflows into ETFs and more monetary policy risk, there are a lot of key drivers that will continue to support gold," said Alex Ebkarian, chief operating officer at Allegiance Gold.

Spot silver fell 0.4% to $30.91 an ounce, platinum fell 0.1% to $936.12, and palladium fell 2% to $912.52.(Newsmaker23)

Source: Reuters