Gold prices edge lower as dollar gains versus yuan

By Karen Rodrigues

BENGALURU (Reuters) - Gold prices shed early gains on Thursday, as the U.S. dollar stood tall against the Chinese yuan amid a grim outlook for the world's second-largest economy.

Spot gold was down 0.3 percent at $1,227.61 an ounce, as of 0755 GMT. Earlier in the session, the yellow metal hit $1,235.16, its highest in more than a week, underpinned by positive U.S.-EU trade negotiation talks.

U.S. gold futures for August delivery were 0.3 percent lower at $1,227.70 an ounce.

"The dollar is stronger against the CNH (Chinese yuan traded offshore) and therefore gold is weaker," a Hong Kong-based trader said.

The offshore Chinese yuan dropped 0.6 percent to 6.7910 dollar. A heated Sino-U.S. trade dispute, signs of a slowdown in the economy and moves by Beijing to loosen monetary conditions have all conspired to dent the yuan's outlook.

"The U.S.-China trade dispute, though, still remains unresolved and is the more challenging one. On gold, it is likely to ebb and flow with U.S. dollar movements, before gaining momentum towards the end of the year," said John Sharma, economist, National Australia Bank.

Meanwhile, Asian shares inched up as the United States and Europe agreed to negotiations to ease barriers on trade, but weakness in China markets underscored persistent worries about the outlook for global growth. [MKTS/GLOB]

Investors are also watching out for the European Central Banks' (ECB) policy meeting, which is due later in the day and the second-quarter U.S. economic growth data, which is expected on Friday.

The ECB is all but certain to keep policy on hold on Thursday, arguing that the risks from an amplifying global trade conflict don't warrant a deviation from its plan to gently exit its easy-money policy of the last few years.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund fell 0.29 percent to 800.20 tonnes on Wednesday.

However, Reuters technical analyst Wang Tao said, spot gold may break a resistance at $1,237 per ounce and rise into a range of $1,246-$1,258.

Among other precious metals, silver edged 0.4 percent lower to $15.50 an ounce, after earlier hitting its highest since July 17 at $15.67 an ounce.

Palladium dropped 0.5 percent to $934.50 an ounce. It touched an over one-week high at $941.10 in the previous session.

Platinum was down 0.5 percent at $836.10 an ounce.

(Reporting by Karen Rodrigues in Bengaluru,; Editing by Joseph Radford and Sherry Jacob-Phillips)