(Updates prices)
* Dollar gains after Fed minutes
* Profit-taking weighs on palladium after record surge
* Investors focus on U.S.-China trade talks
* GRAPHIC-2019 asset returns: By K. Sathya NarayananFeb 21 (Reuters) - Gold slipped on Thursday from a 10-monthhigh hit in the previous session after minutes from the U.S.Federal Reserve's last meeting kindled expectations of aninterest rate hike this year, while palladium fell from anall-time peak.Spot gold was down 0.2 percent at $1,335.60 per ounceat 1317 GMT, having hit its highest since April 19 in theprevious session at $1,346.73.U.S. gold futures fell 0.7 percent to $1,338.20 perounce."The Fed minutes have taken some of the dovishness out ofthe market and (that) is causing a slight softening in gold,"Capital Economics analyst Ross Strachan said.In the minutes of its latest meeting, the Fed said the U.S.economy and its labour market remained strong, prompting someexpectations of at least one more rate hike this year. Higherrates tend to weigh on non-yielding gold. The dollar gained versus major currencies followingthe minutes, further denting gold's appeal. Morgan Stanley said in a note gold would need more than justa weaker dollar and a dovish stance from the Fed to drive itsprice higher, adding that the bank had closed its long positionin the metal.Investors also kept a close eye on talks to end a tradedispute between China and the United States. Gold prices have gained 4 percent so far this year onexpectations the U.S. central bank will pause its interest ratehiking cycle, and on hopes for a trade deal between the world'stwo largest economies.Meanwhile, palladium fell 0.8 percent to $1,476.13per ounce after the autocatalyst metal briefly surpassed the$1,500 level on Wednesday."Palladium touched $1,500 and that has attracted some profittaking in the short term, but the overall fundamental outlookremains the same," Saxo Bank analyst Ole Hansen said."The market is troubled by a lack of supply at a time whenthe emission standards are being tightened, and any correctionat this stage will be looked upon as a potential buyingopportunity," he said.The supply deficit is likely to widen this year as stricteremissions standards increase demand for catalytic converters,autocatalyst manufacturer Johnson Matthey said lastweek. While prices have risen, holdings of palladium-backedexchange traded funds (ETFs) are now below 800,000 ouncescompared with 1.3 million ounces in early 2018. "Since physical metal is in strong demand, it may haveforced some closure of holdings," Hansen said.Among other precious metals, platinum dipped 0.5percent to $818.50, while silver fell 0.6 percent to $15.93.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^Palladium prices versus ETFs ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Arijit Bose and K. Sathya Narayanan in Bengaluru;Editing by Edmund Blair and Jan Harvey)