(Adds comments, updates prices)
* Gold denominated in pounds falls over 2%
* Gold declines about 1% so far this week
* Palladium hits record high of $1,705.84/oz
By Asha Sistla
Oct 11 (Reuters) - Gold prices fell 1% on Friday, on track for a weekly loss, as optimism around the U.S.-China trade talks and the possibility of a Brexit deal diminished some save-haven interest in bullion, while palladium scaled a new record peak.
Spot gold fell 0.6% to $1,485.53 per ounce at 1323 GMT, after touching their lowest in over week at $1,479.31, heading towards a weekly decline of about 1%. U.S. gold futures slid 0.7% to $1,490.20.
"Optimism over the U.S.-China trade situation has fueled a stock market rally, which is the reason for gold underperforming in the last couple of days," said Fawad Razaqzada, market analyst with Forex.com.
"But I don't see a massive sell-off in gold on the back of a trade deal if there is one, it would actually be positive in (the) long term. If China gets a deal, Chinese demand for gold should rise as it is the largest gold consumer in the world."
Global shares basked in optimism over signs of a detente in the U.S.-China trade war and hopes that Britain was moving closer to a smooth exit from the European Union.
The talks between U.S. and Chinese negotiators fed hopes that the two sides could dial down the 15-month dispute and delay a U.S. tariff hike scheduled for next week.
"The precious metals complex is under pressure from trade optimism. ... Further, as Brexit edges closer to a resolution, the market's sense of uncertainty may be waning and sapping some safe haven interest from the complex," TD Securities said in a note.
The chief Brexit negotiators of the EU and Britain met on Friday, hours after Prime Minister Boris Johnson and his Irish counterpart unexpectedly said they had found a pathway to a possible deal at last-ditch talks.
Gold denominated in sterling slid about 2.5% to 1,168.35 pounds an ounce.
Gold investors were also watching for fallout from an attack on an Iranian-owned oil tanker on Friday that added to global geopolitical uncertainty. The vessel was struck by two missiles in the Red Sea off Saudi Arabia's coast, Iranian state television said.
"People are very long and they are still at the moment buying on the dips, below $1,500," ABN Amro analyst Georgette Boele said, adding that the oil tanker incident added a bit of uncertainty, lending some support to gold.
Elsewhere, deficit-hit palladium rose 0.1% to $1,701.39 an ounce, having hit a record peak of $1,705.84 earlier in the session. It gained about 2% so far this week.
Platinum fell 1.5% to $885.58 an ounce, while silver climbed 0.3% to $17.54. (Reporting by Eileen Soreng and Arpan Varghese in Bengaluru; Editing by Pravin Char and Emelia Sithole-Matarise)