(Reuters) - Gold prices inched higher early Monday after falling to a 5-1/2-month low in the previous session, as a trade dispute between the two largest world economies triggered safe-haven buying.

FUNDAMENTALS

Spot gold had edged up 0.2 percent to $1,281.41 per ounce by 0045 GMT. It touched its weakest since late-December at $1,275.01 an ounce on Friday.

U.S. gold futures for August delivery were up 0.4 percent at $1,284.10 per ounce.

The dollar index, which measures the greenback against a basket of six major currencies, rose 0.1 percent to 94.895.

U.S. President Donald Trump said he was pushing ahead with hefty tariffs on $50 billion of Chinese imports on Friday, and the smoldering trade war between the world's two largest economies showed signs of igniting as Beijing immediately vowed to respond in kind.

China will impose additional 25 percent tariffs on 659 U.S. goods worth $50 billion in response to the U.S. announcement that it will levy tariffs on Chinese imports, the Chinese commerce ministry said.

South Korea and the United States are expected to announce the suspension of "large-scale" military drills this week, with the provision that they would restart if North Korea failed to keep its promise to denuclearize, news agency Yonhap said on Sunday.

Syrian state media, citing a military source, reported on Monday that U.S.-led coalition aircraft had bombed "one of our military positions" in eastern Syria, leading to deaths and injuries, but the U.S. military denied carrying out strikes in the area.

Dallas Federal Reserve Bank President Robert Kaplan on Friday said he would be open to raising the Fed's target policy rate a fourth time late this year, but his base case is for just three.

Speculators raised their net long positions in COMEX gold and silver contracts in the week to June 12, U.S. Commodity Futures Trading Commission (CFTC) data showed on Friday.