PRECIOUS-Gold slides 2%, silver sheds 4% on trade optimism, strong U.S. data

* Palladium sole gainer, up 0.6%
* U.S., China to hold high-level trade talks in October

(Updates prices)
By Asha Sistla and Arpan Varghese
Sept 5 (Reuters) - Gold slumped more than 2% and silver fell
over 4% on Thursday as stronger-than-expected U.S. economic data
and hopes of a thaw in the U.S.-China trade war boosted Treasury
yields and soothed fears of an economic slowdown, driving
riskier assets higher.
Spot gold XAU= fell 2.3% to $1,517.20 per ounce at 1:47
p.m. EDT (1747 GMT) and silver XAG= fell 4.2% to $18.74 per
ounce, after earlier dipping as low as $1,509.03 and $18.48,
respectively. Both precious metals were set for their worst
daily percentage decline in more than 2-1/2 years.
U.S. gold futures GCcv1 settled down 2.2% at $1,525.90 per
ounce.
Platinum XPT= also declined about 2.3% to $963 per ounce,
after touching a low for the day at $940.50.
Data showing U.S. private employers' payrolls rose and the
growth of the U.S. services sector accelerated in August boosted
stock markets, which were already buoyed by positive signs on
U.S.-China trade. MKTS/GLOB
"The gold market trading at highs was ambushed by strong
U.S. data from ADP to ISM; the data also savaged a frothy bond
market, which helped drive the slide in gold," said Tai Wong,
head of base and precious metals derivatives trading at BMO.
Driving hopes of a thaw in the protracted dispute between
the world's two largest economies, China's Commerce Ministry
confirmed high-level trade discussions with the United States
set for early October. "The risk sentiment that was sparked by the ebbing trade
situation is leading gold market participants to take some of
their bets off," said Daniel Ghali, commodity strategist at TD
Securities.
The changes in gold and Treasury yields are both symptoms
of the same economic circumstances, Ghali said. "The longer
yields are rising because growth expectations are."
Treasury yields jumped on the positive developments on
U.S.-China trade as well as the strong U.S. data. US/
Investors will now turn their attention to the U.S. nonfarm
payrolls data on Friday for further clarity on the health of the
U.S. economy.
With additional positive payrolls data, "you could see a
further retreat from bonds and gold," BMO's Wong said.
"But barring a stunning trade resolution it remains a
bullish bond market in the U.S. due in large part to the fact
that yields in the rest of the developed world are practically
non-existent. Gold might correct but the overall positive
outlook will remain," Wong added.
Palladium XPD= was the sole gainer, rising 0.6% to
$1,562.93 per ounce, having hit its highest level in more than
1-1/2 months at $1,567.68 earlier in the session.