(Reuters) – Gold prices hovered near 10-month highs on Tuesday as optimism around U.S.-China trade discussions dimmed the dollar’s appeal, while palladium struck a record high on supply concerns.

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

U.S. gold futures rose 0.3 percent to $1,326.4 an ounce.

A new round of talks between Beijing and the United States 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 U.S. 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.

U.S. 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. U.S. financial markets were closed on Monday for Presidents’ Day.

Also supporting gold prices is the U.S. 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 percent 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 notched a fresh peak of $1,475.5 an ounce. The metal has surged almost 17 percent 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 fell 0.5 percent to $15.72 per ounce while platinum rose 0.4 percent to $804.96 per ounce, after touching $807.5 earlier in the session, its highest since Feb. 6.