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Gold prices touched eight-month highs on Wednesday, just hours before the US and China resumes trade negotiations later in the day.

Gold futures contract advanced 0.2 percent to $1,311.80 per ounce, having reached its highest since May 14 of $1,313.30 earlier in the session. Spot gold also rose 0.1 percent to $1,313.16 per ounce.

This year, the precious metal has added 2.4 percent and is on track for a fourth straight monthly climb, while an indicator of the US dollar has dropped for the third straight month.

Sentiment for the precious metal remains strong as well, with holdings in bullion-backed exchange traded funds at their highest levels since April 2013 after approximately 61 metric tons were added this year.

Gold is gaining renewed interest as investors mull over the likelihood of fewer US rate increases this year and as they keep an eye on signs of slower global economic growth amid the US-China trade war.

China’s economy showed further deceleration this month, according to a US-based software firm’s early indicator, while major companies such as tech giant Apple Inc. and heavy machinery maker Caterpillar Inc. are taking a hit.

The delayed release of the US government data following the partial shutdown, and negotiations over the UK’s Brexit deal, have also raised uncertainty in financial markets.

US-China Trade Talks

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Trade talks between the world’s two largest economies is expected to be the main directional driver later this week. China’s Vice Premier Liu He will start two days of high-level trade discussions with US officials, including President Donald Trump, in Washington today.

The two countries are hoping to resolve trade differences before the March 1 deadline.

However, the odds of a sealing a trade deal declined on Tuesday after US prosecutors filed a number of criminal charges against Chinese smartphone maker Huawei Technologies Co. Ltd. for violating sanctions against Iran and allegedly stealing robotic technology from US wireless service provider T-Mobile.

Charges against Huawei lifted safe-haven bids for gold, even after US Treasury Secretary Steven Mnuchin stated that he expects to make significant progress from the US-China meeting and that the case against Huawei is a separate matter.

Negotiators are under severe time pressure as US tariffs on $200 billion in Chinese goods are set to more than double to 25 percent on March 2 unless Trump decides otherwise.  

Ahead of the negotiations, Apple Inc.’s Chief Executive Tim Cook, who is reportedly communicating with Trump on a regular basis, said trade tensions between the two parties will ease this month.

Meanwhile, investors also turn their focus on the Federal Reserve’s interest rate decision later in the day. Having raised rates four times in 2018, the central bank is expected to leave rates unchanged at 2.25 percent to 2.5 percent this year.

Fed Chair Jerome Powell is also set to hold a news conference where he might reiterate in his promise to be patient with future monetary tightening.

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