Gold prices rebounded on Friday, bouncing off a two-month low as news of U.S. tariffs on steel and aluminum imports spooked investors, encouraging them to flock toward safer assets.

Comex gold futures were up 1.00% at $1,318.3 a troy ounce by 02:25 a.m. ET (06:25 GMT), off Thursday's two-month trough of $1,303.60.

U.S. President Donald Trump announced plans on Thursday to impose tariffs of 25% on imported steel and 10% on aluminum, in a move to “protect U.S. industry”.

The move sparked concerns over potential trade wars, which would have a negative impact on the U.S. economy, weighing heavily on risk sentiment.

The news overshadowed positive remarks by Federal Reserve Chair Powell, who told the Senate Banking Committee on Thursday that there was no evidence the U.S. economy is overheating.

Two days earlier, the Fed president had reiterated that the U.S. central bank would likely move forward with gradual increases in interest rates.

Separately, New York Federal Reserve President William Dudley said on Thursday that four interest-rate hikes this year would constitute a "gradual" tightening.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was steady at 90.24, off Thursday's six-week peak of 90.89.

Gold is sensitive to moves in both U.S. rates and the dollar. A weaker dollar makes gold less expensive for holders of foreign currency, while a rise in U.S. rates lifts the opportunity cost of holding non-yielding assets such as bullion.