* Gold edges higher for third straight session
* SPDR gold holdings at lowest level since Oct. 11
* China’s vice premier to visit U.S. for trade talks (Updates prices)
By Brijesh Patel and Diptendu Lahiri
May 7 (Reuters) - Gold prices gained on Tuesday as stock markets weakened after a U.S. threat to hike tariffs on Chinese imports renewed trade tensions and improved demand for safe-haven bullion.
Spot gold was up 0.3 percent to $1,284.45 per ounce at 1:42 p.m. EDT (1742 GMT).
U.S. gold futures settled 0.1 percent higher at $1,285.6 an ounce.
“A dip in equities is keeping the appetite for bullion. Ultimately, we think portfolio allocations in gold are going to increase, keeping in mind if the trade war scenario escalates, that will work as a catalyst for more gold allocation,” said Daniel Ghali, commodities strategist at TD Securities.
U.S. President Donald Trump, in a surprise move on Sunday, said the higher levies would take effect on Friday if no trade deal with China was sealed, which triggered a global sell-off in equities and inflamed fears of a slowdown in global growth.
Adding to the global jitters, Trump’s national security adviser, John Bolton, on Sunday said the United States was deploying a carrier strike group and a bomber task force to the Middle East in response to troubling “indications and warnings” from Iran and to show Washington will retaliate against any attack.
Denting bullion’s appeal was a firmer dollar, which gained 0.2 percent, making gold more expensive for investors of other currencies.
“The dollar has generally performed quite well during any escalation of the trade war, and we did see some early support which may have acted as a slight headwind for gold,” Craig Erlam, senior market analyst with OANDA, said in a note.
“It will be interesting to see in the coming days whether gold sees additional support if fears become reality and new tariffs are imposed.”
Part of the market still expects the United States and China to find common ground and believes that Trump’s tariff threat is likely a negotiation tactic.
China’s commerce ministry confirmed on Tuesday that Vice Premier Liu He will visit the United States from May 9-10 for bilateral trade talks at the invitation of senior U.S. officials.
“This week the market will keep its eyes on the Twitter feeds and headlines on trade. People have been thinking that this (Trump’s announcement) might just be a negotiating tactic, but we will figure that out in a few days,” TD Securities’ Ghali said.
Meanwhile, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, continued a dismal run, falling 0.16 percent to 739.64 tonnes on Monday, its lowest level since Oct. 11.
Among other metals, silver was down 0.1 percent at $14.89 per ounce.
Platinum fell 0.4 percent to $869.25 per ounce and palladium slipped 0.8 percent to $1,325.81. (Reporting by Brijesh Patel and Diptendu Lahiri in Bengaluru; Editing by Paul Simao, Dan Grebler and Andrea Ricci)