Gold slipped on Tuesday as concerns over an escalating trade conflict between the United States and China battered emerging market currencies and prompted investors to seek perceived safety in the dollar.

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A stronger dollar makes dollar-priced gold costlier for non-U.S. investors.

The dollar index rallied as the public comment period on a U.S. proposal for new tariffs on Chinese goods is set to end Thursday, after which Washington can follow through on plans to impose tariffs on $200 billion more of Chinese imports.

Emerging market currencies like the Argentine peso, Turkish lira, South African rand, Brazilian real, Indonesian rupiah and Indian rupee sank as investors fear these export-oriented economies will be caught in the escalating trade conflict.

Also, the U.S. dollar`s status as the chief reserve currency makes it the primary beneficiary of trade conflicts.

"As long as the dollar focus remains strong upside potential seems limited (for gold)," said Saxo Bank`s head of commodity strategy Ole Hansen.

He added, however: "I don`t really see a new low in gold (either). The Chinese yuan has been major driver for weakness (in gold) and it has stablised over the past couple of weeks after the central bank signalled they`re prepared to stabilise it."

Spot gold was down 0.4 percent at $1,195.26 an ounce at 1011 GMT, while U.S. gold futures dropped 0.5 percent to $1,201 an ounce. 

Silver hit a 2-1/2 year low of $14.18 an ounce, but was later down 1.5 percent at $14.25.

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Gold has lost about 8 percent this year amid rising U.S. interest rates, trade disputes and the Turkish currency crisis, with investors parking their money in the dollar.

On a positioning basis, markets are firmly in the stronger dollar camp, with net outstanding positions holding just off the highest levels since January 2017, calculations by Reuters and Commodity Futures Trading Commission data show.

Data this week might lend further fuel to the dollar rally as U.S. investors return after a long weekend. U.S. August manufacturing ISM data is due later in the day and monthly payrolls data is due on Friday.

"Gold and silver should bottom out at the current level as they should attract physical buying amid ongoing festival season in India. Dull economic activities may result in some safe haven buying in China," said Vandana Bharti, assistant vice president of commodity research at SMC Comtrade Ltd.

Platinum was down 1.2 percent at $770, while palladium was down 1.7 percent at $961.97, after hitting an 11-week high of $985.50 on Monday.