BENGALURU, Jan 4 (Reuters) – Gold erased most of its early gains after touching 6-1/2-month highs on Friday, as Asian equities and the U.S. dollar regained some footing after Beijing announced a new round of trade talks with Washington amid fears of a global economic slowdown. Spot gold was up about 0.2 percent at $1,295.55 per ounce, as of 0621 GMT, after touching $1,298.42 earlier, its highest since mid-June. U.S. gold futures were up 0.2 percent at $1,297.30 per ounce. A working team led by Deputy U.S. Trade Representative Jeffrey Gerrish will come to China to have “positive and constructive discussions” with Chinese counterparts, China’s commerce ministry said in a statement on its website. The news on Sino-U.S. trade talks is good for both U.S. and China as the trade tension had taken a toll on all economic data,” said Vandana Bharti, assistant vice-president of commodity research at SMC Comtrade Ltd. Asian shares found a crumb of comfort on Friday, while dollar edged up on renewed optimism in U.S.-China trade spat, though recession fears still had markets betting the next move in U.S. interest rates might be down. The Fed funds futures market is now pricing in a good chance of a rate cut by the end of this year, which is positive for gold, said Amit Kumar Gupta, portfolio management services head, Adroit Financial Services in New Delhi. Investors now will be looking for cues about interest rate hikes from a discussion between U.S. Federal Reserve Chair Jerome Powell and former Fed Chairs Janet Yellen and Ben Bernanke on Friday. Gold is highly sensitive to rising U.S. interest rates, which lift the opportunity cost of holding non-yielding bullion. Investors had expected the U.S. Fed to stay on its tightening path after three hikes last year, but the ongoing trade war and recent disappointing corporate earnings have put those expectations to rest. Meanwhile, markets are awaiting the closely watched December payrolls report later in the day. Spot gold has risen over 1 percent so far this week, mainly on safe haven buying spurred by volatile equity markets and fears of a global economic slowdown. Indicating investor appetite for gold, holdings of SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, rose to 795.31 tonnes, their highest since early August. “Concerns about tepid global economic growth and volatility in risk assets is likely to keep the safe-haven asset – gold – in flavour,” said Sugandha Sachdeva, vice-president – metals, energy and currency research, Religare Broking Ltd. Among other precious metals, palladium dipped 0.1 percent to $1,262.50 per ounce. Silver was up 0.2 percent at $15.77 per ounce, while platinum gained about 0.7 percent to $803.50.