PRECIOUS-Gold slips after hitting 1-week high on trade war fears

    * U.S. dollar, stocks pare losses after Trump advisor exits
    * Gold drops to $1,325.5 after hitting 1-week high
    * Palladium falls to lowest in nearly one month 

 (Recasts throughout, updates prices; adds comment, NEW YORK to
    By Renita D. Young and Maytaal Angel
    NEW YORK/LONDON, March 7 (Reuters) - Gold prices slipped on
Wednesday after hitting a one-week high on news that a top
economic advisor to the Trump administration had resigned,
stoking fears of a trade war and knocking down the dollar.
    Market watchers said the departure of economic adviser Gary
Cohn, a former Wall Street banker, would embolden protectionist
forces in the U.S. administration as President Donald Trump
tries to impose hefty tariffs on steel and aluminium. 
    The U.S. dollar and global stock markets initially sagged on
the Cohn departure. The greenback staged a steady recovery
during U.S. trading against a basket of major currencies, while
Wall Street shares pared initial losses, as doubts persisted
over whether the proposed tariffs would be enacted.             
    Spot gold        dropped 0.6 percent at $1,325.51 per ounce
by 1:34 p.m. EST (1834 GMT), after touching $1,340.42, its
highest since Feb. 26. U.S. gold futures         for April
delivery settled down $7.60, or 0.6 percent, at $1,327.60 per
    "It's a little profit-taking from hitting highs yesterday.
The mode today is risk-off for everything, not just commodities,
equities, even cryptocurrencies are down," said Michael
Matousek, U.S. Global Investors trader.
    "It became a risk-off mode because people are unsure of the
direction the government is going to take about a lot of
    While a possible trade war could be positive for gold, South
Korea agreeing to denuclearization talks could pressure gold,
traders said, keeping gold in a tight trading range.
    Trump said on Tuesday he saw "possible progress" regarding
North Korea after South Korea said Pyongyang is willing to hold
talks with the United States on denuclearization and will
suspend nuclear tests while discussions are underway.
    Gold is used as an alternative investment during times of
political and financial uncertainty, and a weaker dollar makes
the metal cheaper for holders of other currencies. 
    Support for gold could be found below $1,300 per ounce, said
Rob Haworth, senior investment strategist for U.S. Bank Wealth
    Meanwhile, silver        fell 1.4 percent at $16.49 per
ounce, after hitting its highest in more than two weeks on
    "Silver increased (on Tuesday) almost twice as sharply as
gold, pushing the gold/silver ratio slightly below 80 again. In
historical terms silver is still far too cheap, however – and in
our opinion unjustifiably so," said Commerzbank in a note. 
    Platinum        fell 1.7 percent at $952.70 per ounce,
earlier dipping to $945.70, a two-month low. Palladium       
declined 2 percent at $966.40, having hit $961.55, its lowest
since Feb. 9.  

 (Additional reporting by Nithin Prasad in Bengaluru, editing by
David Evans and Rosalba O'Brien)