PRECIOUS-Gold stays near 10-month peak; Palladium scales new high

(Updates prices)

* Palladium hits fresh high of $1,475.5/oz

* Spot gold may test resistance at $1,331/oz- technicals

* New round of U.S.-Sino talks to take place later insession

By Karthika Suresh Namboothiri

Feb 19 (Reuters) - Gold prices hovered near 10-month highson Tuesday as optimism around U.S.-China trade discussionsdimmed the dollar's appeal, while palladium struck a record highon supply concerns.

Spot gold XAU= slipped 0.2 percent to $1,323.28 per ounceas of 0648 GMT. The metal had touched $1,327.64 an ounce in theprevious session, its highest since April 25.

U.S. gold futures GCv1 rose 0.3 percent to $1,326.4 anounce.

A new round of talks between Beijing and the United Statesto resolve their trade spat will take place in Washington laterin the day, with follow-up sessions at a higher level in thecourse of the week.*:nS0N1XH00F

"If there is progress in trade talks there will beincreasing appetite for emerging-market currencies, and the U.S.dollar will weaken," Argonaut Securities analyst Helen Lau said,adding that the dollar will lose its safe-haven appeal, whichwill be supportive of gold.

U.S. President Donald Trump had said last week he mightextend the March 1 deadline for a deal and keep tariffs onChinese goods from rising.*:nL1N20B0AP.

The dollar index .DXY against its peers was a shade weakerat 96.881. U.S. financial markets were closed on Monday for Presidents' Day. USD/

Also supporting gold prices is the U.S. Federal Reserve'sdovish approach to monetary policy tightening, which reduces thecost of holding gold, said John Sharma, an economist withNational Australia Bank.

Minutes of the Fed's last policy meeting are due onWednesday and should provide more guidance on the likelihood ofrate increases this year.

Gold prices have gained 3.3 percent so far this year onexpectations the Fed will pause its cycle of interest rate hikesand on hopes the world's two largest economies will hammer out atrade deal.

Spot gold may test a resistance at $1,331 per ounce, a breakabove which could lead to a gain to the next resistance at$1,343, according to Reuters market analyst Wang Tao.*:nL3N20E1NK

"Gold prices have inched up and consolidated above $1,325.Softer economic prospects are likely to put some pressure oninterest-bearing assets," said Benjamin Lu, an analyst withSingapore-based Phillip Futures.

Among other precious metals, palladium XPD= notched afresh peak of $1,475.5 an ounce. The metal has surged almost 17percent so far this year.

A supply deficit in the market has boosted demand for theautocatalyst metal in the backdrop of stricter emissionsstandards.

Silver XAG= fell 0.5 percent to $15.72 per ounce whileplatinum XPT= rose 0.4 percent to $804.96 per ounce, aftertouching $807.5 earlier in the session, its highest since Feb.6. (Additional reporting by Asha Sistla in Bengaluru; Editing byShreejay Sinha) ((; +91 80 67490997 (If within U.S. call 651-848-5832); Reuters

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