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Gold prices hovered near 10-month highs on Tuesday as optimism around US-China trade discussions dimmed the dollar's appeal, while palladium struck a record high on supply concerns.
Spot gold was little changed at $1,326.48 per ounce as of 0814 GMT. The metal had touched $1,327.64 an ounce in the previous session, its highest since April 25.
US gold futures rose 0.5 per cent to $1,329 an ounce.
A new round of talks between Beijing and the US to resolve their trade spat will take place in Washington later in the day, with follow-up sessions at a higher level in the course of the week.
“If there is progress in trade talks, there will be increasing appetite for emerging-market currencies, and the US dollar will weaken,” Argonaut Securities analyst Helen Lau said, adding that the dollar will lose its safe-haven appeal, which will be supportive of gold.
US President Donald Trump had said last week he might extend the March 1 deadline for a deal and keep tariffs on Chinese goods from rising..
The dollar index against its peers was a shade weaker at 96.881. US financial markets were closed on Monday for Presidents' Day.
Also supporting gold prices is the US Federal Reserve's dovish approach to monetary policy tightening, which reduces the cost of holding gold, said John Sharma, an economist with National Australia Bank.
Minutes of the Fed's last policy meeting are due on Wednesday and should provide more guidance on the likelihood of rate increases this year.
Gold prices have gained 3.3 per cent so far this year on expectations the Fed will pause its cycle of interest rate hikes and on hopes the world's two largest economies will hammer out a trade deal.
Spot gold may test a resistance at $1,331 per ounce, a break above which could lead to a gain to the next resistance at $1,343, according to Reuters market analyst Wang Tao.
“Gold prices have inched up and consolidated above $1,325. Softer economic prospects are likely to put some pressure on interest-bearing assets,” said Benjamin Lu, an analyst with Singapore-based Phillip Futures.
Among other precious metals, palladium rose to a fresh peak of $1,491 an ounce. The metal has surged almost 17 per cent so far this year.
A supply deficit in the market has boosted demand for the autocatalyst metal in the backdrop of stricter emissions standards.
Silver was little changed at $15.80 per ounce, while platinum inched 0.3 per cent higher to $804, after touching $807.5 earlier in the session, its highest since February 6.
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