* Spot gold hits highest since Oct. 25 at $1514.20/oz
* Dollar falls to its lowest since Oct. 21
* GRAPHIC -2019 asset returns: http://tmsnrt.rs/2jvdmXl
(Updates prices)
By Eileen Soreng
Oct 31 (Reuters) - Gold prices jumped over 1% on Thursday supported by an interest rate cut by the U.S. Federal Reserve and as uncertainty surrounding a U.S.-China trade deal bolstered the metal's safe-haven appeal.
Spot gold XAU= was 1.2% higher at $1,512.81 an ounce as of 5:17 p.m. ET, having earlier risen to a near one-week high of $1514.20. Prices were set for a monthly gain of more than 2%.
U.S. gold futures GCv1 settled up 1.2% at $1,514.8.
"The Fed lowered rates and that's inflationary so people think lower rates should create inflation and that's a trigger for gold," said Michael Matousek, head trader at U.S. Global Investors.
The U.S. central bank on Wednesday cut interest rates for the third time this year to help sustain U.S. growth despite a slowdown in other parts of the world, but signalled there would be no further reductions unless the economy takes a turn for the worse. dollar fell to a 10-day low against a basket of major currencies as investors evaluated whether the Fed would continue to cut rates. USD/
Gold is highly sensitive to any reduction in interest rates, which decreases the opportunity cost of holding non-yielding bullion. Rate cuts also weigh on the dollar, in which gold is priced.
Gold is on an uptrend and if it goes above the $1,535 level it would be the next leg in the bull market in gold, Matousek said.
Uncertainties on the trade front also supported bullion, with the cancellation of an Asia-Pacific economic cooperation summit in Chile next month, at which U.S. and China were expected to sign an interim deal to ease hostilities in their long-running trade war.
"A 'Phase One' deal is expected to have only a limited positive outcome for the US economy," UBS strategist Joni Teves said in a note, adding "it is premature to expect a more substantial deal."
Also, Bloomberg earlier reported that Chinese officials have doubts about whether it is possible to reach a comprehensive long-term trade deal with Washington and U.S. President Donald Trump. U.S. weekly jobless claims showed the number of Americans filing applications for unemployment benefits rose slightly more than expected last week, adding to gold's gains. palladium XPD= was down 0.5% at $1,797.06 an ounce, having hit a record high of $1,824.50 on Wednesday. The autocatalyst metal was set for a third straight monthly gain, up 7% in October.
Silver XAG= rose 1.4% to $18.12 an ounce while platinum XPT= rose by 0.7% to $932.26, with both metals set for monthly gains.