BENGALURU, Sept 24 (Reuters) – Gold edged lower on Monday as the dollar held firm on news that China has cancelled trade talks with the United States, with the market also eyeing this week’s U.S. Federal Reserve meeting for guidance on future rate hikes. FUNDAMENTALS: * Spot gold inched down 0.2 percent to $1,196.51 by 0039 GMT, after falling as much as 1.3 percent on Friday on a stronger dollar. * U.S. gold futures were virtually unchanged at $1,201.1 an ounce. * Liquidity is expected to be thin during Asian hours as markets in Japan, China and South Korea are closed for a holiday. * Investors were squarely focused on the Sino-U.S. trade war as China added $60 billion of U.S. products to its import tariff list, retaliating against duties on $200 billion of Chinese imports that come into effect on Monday.

* China also cancelled mid-level trade talks with the United States, as well as a proposed visit to Washington by vice premier Liu He originally scheduled for this week, the Wall Street Journal reported.

* Investors are also awaiting this week’s Federal Reserve meeting. The U.S. central bank is widely expected to raise benchmark interest rates and shed light on the path for future rate hikes. The Fed will end its two-day policy meeting on Wednesday.

* Financial markets need to gird for a lengthy spell of turbulence as more of the world’s top central banks begin shutting down stimulus programmes and raising interest rates, the Bank for International Settlements said in its latest report.

* The dollar was steady against a basket of currencies at 94.221. The dollar rose against pound on Friday amid doubts about Brexit deal.

* British Prime Minister Theresa May said on Friday that Brexit talks with the European Union had hit an impasse, defiantly challenging the bloc to come up with its own plans a day after EU leaders savaged her proposals.

* Discounts for gold against official domestic prices in India widened to three-month highs last week, even as an escalation in the trade dispute between China and the United States triggered safe haven buying in China, the world’s biggest consumer.

* Long-time gold bull John Paulson followed through on Friday on a pledge made last year to team up with other gold investors in an effort to work with management of companies in the gold sector to improve returns, according to the group, called the Shareholders Gold Council.

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