Golds record rally pauses as investors cash in gains

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Gold hit all-time peak at $3,357.40 per ounce

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Dollar heads for weekly loss

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Palladium down more than 1%

(Adds comments, updates for U.S. mid-session trading)

By Brijesh Patel

April 17 (Reuters) - Gold prices fell more than 1% on Thursday after a sharp rise in the previous session as investors booked profits ahead of a long weekend, although softer dollar and escalating U.S.-China trade tensions kept bullion above the $3,300 per ounce level.

Spot gold fell 1.2% to $3,302.1 an ounce as of 11:21 a.m. ET (1521 GMT), after touching a record high of $3,357.40 earlier in the session. Bullion has gained 2% this week.

U.S. gold futures were down 0.9% at $3,315.0.

"Gold is in a secular bull market and these subtle pull backs on some profit taking is healthy," said Alex Ebkarian, chief operating officer at Allegiance Gold.

Gold prices surged 3.6% on Wednesday, driven by U.S. President Donald Trump's order to open a probe into potential tariffs on all critical mineral imports, in addition to reviews into pharmaceutical and chip imports.

"There is some risk that a trade deal could be announced over the weekend, quite possibly with Japan. However, gold's trajectory remains higher given the uncertainty and deep concern that continues to worry asset markets," said Tai Wong, an independent metals trader.

Trump touted "big progress" in tariff talks with Japan on Wednesday, in one of the first rounds of face-to-face negotiations since his barrage of duties on global imports roiled markets and stoked recession fears.

The dollar index recovered, but was still heading for a weekly fall. A weaker greenback makes gold less expensive for holders of other currencies.

"We remain bullish towards gold. That said, near-term corrections are likely to occur as tactical players take profits or perhaps experience margin calls triggered by another round of equity liquidations," consultancy Metals Focus said.

Elsewhere, spot silver fell 1.6% to $32.22 an ounce, platinum slipped 0.5% to $962.60 and palladium dipped 1.5% to $957.50. (Reporting by Brijesh Patel, Ishaan Arora in Bengaluru; Editing by Sahal Muhammed)