PRECIOUS-Gold hits 3-month high on trade tensions, hopes for Fed rate cut

* Dollar struggles near seven-week low

* Powell: Fed will react “as appropriate” to trade war risks

* Silver hits one-month high, on track for 6th session of gains

* Platinum hits near 3-week high (updates prices)

June 5 (Reuters) - Gold prices rose 1% to a more than three-month high on Wednesday as trade tensions induced safe-haven demand and increased bets on a cut in interest rates by the U.S. Federal Reserve.

Spot gold gained 0.8% to $1,335.82 per ounce at 1144 GMT, having reached its highest since Feb. 21 at $1,340.08 earlier.

U.S. gold futures gained 0.9% to $1,340.50 an ounce.

“A lot of the strength in gold is related to the trade war tensions, which have been ratcheted up after Trump’s tariff threats on Mexico,” said Philip Newman, a director at Metals Focus.

As the United States’ trade clash with China drags on, U.S. President Donald Trump’s tariff threat to Mexico added to concerns, drawing investors to safe-haven assets such as gold.

“Earlier this year, when the trade war was paramount (news) we saw dollar strength since investors thought that the main casualties will be the emerging markets,” Newman said.

“Now due to concerns about the global economy, people are viewing that as maybe the next move could be a cut in U.S. rates and that is undermining the dollar.”

The U.S. dollar struggled near a seven-week low and now seems to have lost its former appeal as a safe haven, especially as the U.S. Fed reels under consistent pressure from Trump, who has advocated for a rate cut.

On Tuesday, Fed Chair Jerome Powell moved away from his “patient” approach and instead acknowledged risks due to trade conflicts, saying the central bank would respond “as appropriate” to the same.

Earlier this week, St. Louis Fed President James Bullard said a rate cut “may be warranted soon”.

Lower interest rates would support non-yielding bullion.

Shortly after Powell’s statement on Tuesday, data showed new orders for U.S.-made goods fell in April and shipments dropped by the most in two years, raising concerns that the U.S. economy could fall prey to an elongated trade war.

Gold prices have gained over $60 since Trump’s tariff threat on Mexico, with investors selling riskier assets.

The jump in gold prices also saw a 2.2% rise in the holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, on Monday. It was SPDR’s biggest one-day percentage gain since July 2016.

Silver gained 0.3% to $14.86 per ounce, having touched a one-month high of $14.90, on track for its sixth consecutive session of gains.

Platinum rose 1.2% to $825.61 per ounce, having hit $832.63 its highest since May 17, earlier in the session. Palladium fell 0.3% to $1,342.85 per ounce. (Reporting by Arijit Bose in Bengaluru; Editing by Dale Hudson and Louise Heavens)