Gold firms as trade hopes dent dollar; palladium sets record high

Spot gold rose 0.3% to $1,331.43 per ounce

Image used for illustrative purpose. Gold bars from the vault of a bank are seen in this illustration picture taken in Zurich .

Image used for illustrative purpose. Gold bars from the vault of a bank are seen in this illustration picture taken in Zurich .

REUTERS/Arnd Wiegmann

Gold gained on Monday as the dollar eased on optimism that the United States and China are nearing a deal to end their trade war while palladium set another record high on deepening supply constraints.

Spot gold rose 0.1 percent to $1,329.54 an ounce at 1045 GMT and U.S. gold futures GCcv1 were down 0.1 percent at $1,331.70.

Capping gains were higher share prices, which rose on signs of progress in the U.S.-China trade conflict. 

U.S. President Donald Trump on Sunday said he would delay an increase in U.S. tariffs on Chinese goods thanks to "productive" trade talks and that he and Chinese President Xi Jinping would meet to seal a deal if progress continued. 

"The risk sentiment in the equity market is pretty positive against the backdrop of the U.S.-China trade talk news and some support from the Chinese government, which is negative for gold," said Julius Baer analyst Carsten Menke.

"At the same time, we see that the dollar is a tad lower, which is providing a bit of support to gold prices."

Menke added that expectations of easing trade tensions between U.S. and China would be positive for physical demand from major consumer China.

The dollar index, which measures the greenback against a basket of other currencies, was down 0.1 percent.

"Gold is not quite seeing the boost from Trump's tweet than you might have expected ... Still, it continues to look bullish, with $1,320 having provided adequate support late last week," OANDA senior market analyst Craig Erlam wrote in a note.

Gold rose to a 10-month peak of $1,346.73 last week and has gained about 4 percent this year, helped by expectations that the U.S. central bank will pause interest rate increases.

Markets are looking ahead to a testimony by U.S. Federal Reserve Chairman Jerome Powell on Tuesday and Wednesday.

In other precious metals, palladium hit a record peak of $1,526.60 an ounce. The autocatalyst metal has soared more than 80 percent since mid-August on rising global car sales and supply shortages.

"The fundamentals remain strong, but in my perspective it is more technical trading and trend-following which is pushing prices higher," Julius Baer's Menke said.

Platinum , which briefly touched its highest since Nov. 20 at $851, was up 1 percent at $848.59.

The platinum group metals (PGM) continued to rise as supply risks increased after South Africa's Association of Mineworkers and Construction Union (AMCU) planned to extend a strike from Sibanye Gold SGLJ.J to other producers in the country, ANZ analysts said in a research note.

Spot silver rose 0.4 percent to $15.98.

(Reporting by Swati Verma in Bengaluru Editing by David Goodman) ((; within U.S. +1 651 848 5832, outside U.S. +91 80 6749 6356/1298 ; Reuters Messaging:

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