BENGALURU, Sept 12 (Reuters) – Gold prices inched down on Wednesday after touching two-week lows in the previous session, with investors staying away from bullion on fears the U.S.-China trade war could escalate. The trade conflict has prompted investors to buy the U.S. dollar in the belief that the United States has less to lose from the dispute, making dollar-priced gold more expensive for non-U.S. buyers.FUNDAMENTALS: * Spot gold was down 0.1 percent at $1,196.21 an ounce at 0102 GMT, after hitting its lowest since Aug. 24 at $1,187.21 on Tuesday. * U.S. gold futures were mostly steady at $1,202.40 an ounce. * Traders were bracing for a potential escalation in the Sino-U.S. row after President Donald Trump said last week that he was ready to impose tariffs on virtually all Chinese imports to the United States. * Trump told reporters on Tuesday that the United States was taking a tough stance with China, but he described trade talks with Canada as going well. * China told the World Trade Organization on Tuesday it wanted to impose $7 billion a year in sanctions on the United States in retaliation for Washington’s non-compliance with a ruling in a dispute over U.S. dumping duties. * Gold prices dropped more than 12 percent from a peak hit in April as the metal lost its safe-haven status to the U.S. dollar, driving investors to raise their bearish bets on Comex gold and liquidate gold exchange traded funds. * Expectations that the U.S. Federal Reserve will raise interest rates in September have also made investors cautious on gold. * Higher rates increase bond yields, making non-yielding bullion less attractive, and tend to boost the dollar. * The dollar index, which measures the greenback against a basket of currencies, was down 0.1 percent at 95.129. * Societe Generale said on Tuesday that it sees gold prices at $1,275 per ounce in six months. * Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.03 percent to 745.18 tonnes on Tuesday from Monday. * Silver hit its lowest since January 2016 at $13.90 on Tuesday.