* Stock markets climb and dollar steadies
* Palladium edges off Friday's multi-month low
* GRAPHIC-2018 asset returns: http://tmsnrt.rs/2jvdmXl
(Updates throughout, adds LONDON dateline) LONDON, April 9 (Reuters) - Gold retreated on Monday, erasing the previous session's slim gains as fading concern over potential escalation in the trade stand-off between China and the United States sparked a recovery in cyclical assets such as stocks at bullion's expense. Gold rose half a percent on Friday as simmering worries over trade friction and softer than expected U.S. payrolls data for March knocked equities and the dollar lower. However, it has struggled to maintain those gains.
Spot gold was down 0.3 percent at $1,338.45 an ounce
fell by $4.10 to $1,332.00. "Holdings of physically backed gold products have been creeping up slowly, but not to the extent that you'd expect if a trade war was on the verge of breaking loose," said Julius Baer analyst Carsten Menke. "This is reflected in the gold market overall at this point in time. In the end, everybody knows a trade war will only bring losers and no winners, and this is what will eventually prevail when they sit together and negotiate the issues." Global equities rose and the dollar steadied on Monday as the U.S. government played down fears of a trade war with China.
U.S. President Donald Trump predicted on Sunday that China would take down its trade barriers, expressing optimism despite escalating tensions between the nations. Trump late on Thursday threatened to slap $100 billion more in tariffs on Chinese imports, while Beijing said it was fully prepared to respond with a "fierce counter strike."
Hedge funds and money managers cut their net long position in COMEX gold in the week to April 3 and boosted their net short position in silver to another record, U.S. Commodity Futures Trading Commission data showed on Friday.
Silver was flat at $16.35 an ounce, while platinum
gained 0.4 percent to $916.24.
Palladium , which as a component in autocatalysts is
the most industrial of the major precious metals, was up 1.9 percent at $918 an ounce, in line with a bounce in other cyclical assets. The metal had fallen for the past 11 sessions, hitting its lowest since mid-August at $895.47 on Friday. It is now down more than a fifth from the record high reached in January. "The near 20 percent correction in palladium prices signals a possible bear market," ScotiaMocatta said in a monthly note. The correction is not surprising given the sharp price gains of recent years, it said, but added: "Palladium's strong fundamentals remain in place, so we would expect dip-buying before too long."
(Reporting by Jan Harvey Additional reporting by Swati Verma in Bengaluru Editing by David Goodman)