BENGALURU, March 28 (Reuters) - Gold on Wednesday backed away from an over 5-week high touched in the previous session as concerns about a trade war between the United States and China eased, which supported the dollar and reduced the incentive to hold bullion as a safe-haven asset. Spot gold was down 0.4 percent at $1,339.46 per ounce at 0723 GMT. Prices dropped 0.7 percent on Tuesday, its biggest percentage loss since March 15, after rising to over 5-week highs. U.S. gold futures for April delivery were down 0.1 percent to $1,341.10 per ounce. "The gold price is mainly driven by the U.S. dollar ... The risk of trade war is shrinking, which is good for the U.S. dollar," said Ji Ming, chief analyst, Shandong Gold Group. The dollar index , which measures the greenback against six other major currencies, rose 0.2 percent to 89.503 after gaining 0.3 percent on Tuesday, the most since March 20. The dollar recovered from the five-week low as concerns of a global trade war were eased by optimistic news that the U.S. and China were set to begin trade negotiations, after earlier exchanging threats. However, the White House said Trump had discussed trade practices with China in calls on Tuesday with French President Emmanuel Macron and German Chancellor Angela Merkel, which could lead to an escalation of trade tensions. "Any sort of an announcement that negotiations are being formalized and/or are being taken seriously by both sides (U.S.-China), could provide strength to the greenback and alternatively weigh on precious metals instead," INTL FCStone analyst Edward Meir said in a note. A firmer dollar makes gold, which is seen as a safe investment in times of political and financial uncertainty, more expensive for holders of other currencies. Holdings of the SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, fell 0.14 percent to 846.12 tonnes on Tuesday from 847.30 tonnes on Monday. In other precious metals, spot silver was down 0.2 percent at $16.46 per ounce. Silver ended 1 percent lower in the previous session, after rising to a three-week high of $16.80 per ounce. Platinum was down 0.2 percent at $941 per ounce, having fallen to lowest since early January in the previous session at $935. Palladium was steady at $971.70 an ounce.