By K. Sathya Narayanan

(Reuters) - Gold fell on Friday as the dollar strengthened ahead of trade talks between the U.S. and Chinese leaders at the G20 summit on Saturday, while palladium prices crossed the $1,200 per ounce mark for the first time.

U.S. President Donald Trump and his Chinese counterpart Xi Jinping will be meeting on the sidelines of the summit in Argentina to discuss the ongoing trade dispute between the world's two biggest economies.

Spot gold <XAU=> dipped 0.29 percent to $1,220.01 per ounce at 1:32 p.m. EST (1832 GMT). U.S. gold futures <GCv1> settled down 0.33 percent at $1,220.10 an ounce.

"The dollar index has moved to its daily high and the U.S. stock market is bouncing back and that is also working against gold," said Kitco Metals senior analyst Jim Wyckoff.

A big price movement is unlikely in gold for the rest of the session "unless there is some kind of a major announcement from out of Buenos Aires from G20," he added.

The dollar index <.DXY>, which measures the greenback against a basket of six major currencies, recouped losses, having touched a near one-week low in the previous session, as markets awaited the outcome of the talks. [USD/]

"The markets now have more clarity into issues such as the U.S. Federal Reserve's interest rate thinking, the Italian budgetary drama, and the U.S.-China trade war," said Ronan Manly, a precious metals analyst at Singapore-based dealer BullionStar.

"As such, this clarity and visibility could cap any further gains for gold in the short term. So, a major move above the current range is not likely."

Gold prices have been trading between $1,210.65 and $1,230.07 over the past two weeks.

Among other precious metals, palladium <XPD=> inched down 0.24 percent to $1,178.15 per ounce, having soared to a record high earlier in the session above the key $1,200 an ounce level for the first time.

However the metal, mainly used in emissions-reducing auto catalysts for vehicles, rose more than 9 percent in this month.

Graphic: Gold palladium ratio (https://tmsnrt.rs/2Q1F3aO)

"There is lot of tightness of palladium physical metal supply that's translating into a fundamental support in strong palladium price," said Miguel Perez-Santalla, vice president of Heraeus Metal Management in New York.

"The investors and speculators are driving the prices higher. Until the fundamental story changes, we are going to see very strong palladium prices."

Spot silver <XAG=> fell 1.1 percent to $14.15 per ounce.