PRECIOUS-Gold sheds 2% on signs of U.S.-China trade thaw

* U.S. and China agree to continue trade talks
* Silver falls over 0.6%, palladium gains about 2%
* Dollar index rises 0.4%

(Updates prices)
By Sumita Layek and Arpan Varghese
Aug 13 (Reuters) - Gold fell as much as 2% in a reversal
from six-year highs on Tuesday, after the United States said it
would delay tariffs on some Chinese products and on news that
both sides agreed to continue trade talks.
Spot gold XAU= was down 0.7% at $1,501.22 per ounce at
2:00 p.m. EDT (1800 GMT), having earlier hit its highest level
since April 2013 at $1,534.31.
U.S. gold futures GCv1 settled down 0.2% to $1,514.1 an
ounce.
The Office of the U.S. Trade Representative said the Trump
administration will delay 10% tariffs on certain Chinese
products, including laptops and cell phones, that had been
scheduled to start next month. "A thawing, perhaps reconsideration of the new proposed
tariffs has drained the heat from the (gold) rally for now,"
said Tai Wong, head of base and precious metals derivatives
trading at BMO.
"While this does not dramatically dim the overall positive
outlook for gold, it will temper its momentum in the short
term."
U.S. stocks turned positive and the dollar rose on the news,
with further momentum also coming from news that both sides had
agreed to conduct phone calls on trade again in two
weeks. USD/ MKTS/GLOB
"Gold will be trading in a defensive position until the next
two weeks; there will be some buying at the dips but the
explosive moves higher we've seen in the last two weeks is not
expected with the trade talks hanging over the market," said Bob
Haberkorn, senior market strategist at RJO Futures.
Gold's rise to over 6-year highs earlier in the day was
triggered by a rout in the Argentine peso and unrest in Hong
Kong. Market focus is now on the U.S. Federal Reserve's annual
symposium next week for clues on the future trajectory of
interest rates. Traders see a 86.2% chance of a 25 basis-point
rate cut by the U.S. central bank this September. FEDWATCH
Meanwhile, holdings in the world's largest gold-backed
exchange-traded fund, SPDR Gold Trust GLD , jumped 0.9% to
847.77 tonnes on Monday. GOL/ETF
Among other precious metals, silver XAG= fell 0.6% to
$16.96 per ounce, while platinum XPT= was up 0.2% to $853.81.
Palladium XPD= gained 1.9% at $1,454.03 an ounce.