* Worries over U.S.-China trade dispute support gold
* Investors eye German squabble over immigration
* U.S. dollar holds near strongest since November
* Global stock markets fall
* Technicals suggest gold to fall further
(Updates prices)
By Peter Hobson
LONDON, June 18 (Reuters) - Gold on Monday held close to 5-1/2 month lows, with a strong dollar offsetting the impact on prices of an escalating trade dispute between the United States and China.
The stronger dollar dampens demand for gold by making it costlier for buyers holding other currencies, while geopolitical uncertainty fuels interest in bullion as a safe investment.
Spot gold XAU= was flat at $1,278.71 an ounce at 1434 GMT, while U.S. gold futures GCcv1 for August delivery were 0.2 percent higher at $1,281.20 an ounce.
The dollar was slightly firmer and near its strongest since November against a basket of currencies. .DXY USD/
Gold plunged 1.8 percent on Friday, its biggest one-day fall since November 2016, as Washington decided to enact tariffs on $50 billion in Chinese goods, Beijing pledged to respond in kind and the dollar rocketed higher. fear a trade war could damage global growth. World stocks fell on Friday and Monday. MKTS/GLOB
"We had a flush-out on Friday and the market is trying to work out whether these new (gold) prices are justified or not," said Saxo Bank analyst Ole Hansen.
Gold would remain sensitive to trade dispute headlines and the possibility that a showdown over immigration between German Chancellor Angela Merkel and her conservative allies the Christian Social Union could escalate, Hansen said. market is also ignoring the political risks in Germany," said analysts at Commerzbank (DE:CBKG). "A lack of consensus on refugee policy could even cause a split in the government."
On the technical side, Fibonacci support for gold was at $1,267.10, with resistance at $1,301.40, analysts at ScotiaMocatta said.
They added that as long as gold continued to trade below its 200-day moving average at $1,307 prices were more likely to fall than rise.
Reuters technical analyst Wang Tao said gold could break support at $1,277 an ounce and fall towards $1,258-$1,268. by funds on higher gold prices on the Comex exchange had risen in the week to June 12, supporting prices, but Friday's rout may have forced some to liquidate their positions. 3088691MNET
Holdings of gold by exchange traded funds (ETFs) tracked by Reuters meanwhile were stable after falling by 1.4 million ounces, or 2.4 percent, since late May. HLDTOTALL=XAU
In other precious metals, silver XAG= was down 0.3 percent at $16.46 an ounce after falling 3.6 percent on Friday.
Platinum XPT= was 0.1 percent lower at $886.50 an ounce and palladium XPD= was down 0.5 percent at $991.25 an ounce.