Gold prices rose on Thursday as the dollar drifted down from one-month highs hit in the previous session on upbeat US economic data.
Spot gold had ticked up 0.3 per cent to $1,235.71 per ounce by 0237 GMT, while US gold futures were up 0.4 per cent at $1,237.3.
“Perhaps the market is currently underestimating the prospects of an interest rate hike by the US Federal Reserve in March, given the strong economic data. The impact would probably show in the medium term,” said Jiang Shu, chief analyst at Shandong Gold Group.
“Gold is approaching a turning point and the upward trend in prices could end in the near future.”
Retail sales, consumer prices
US retail sales rose more than expected in January and consumer prices recorded their biggest gain in nearly four years, boosting the prospects of an interest rate increase from the Fed next month.
The dollar index fell 0.3 per cent to 100.93, with traders booking profits following the greenback's rally to its highest since January 12 at 101.76 on Tuesday.
Federal Chair Janet Yellen had said on Tuesday that delaying increases could leave the Fed's policymaking committee behind the curve.
On Wednesday, Philadelphia Fed President Patrick Harker had repeated his view that the central bank should continue to raise interest rates this year.
Gold is highly-sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
Uncertainty surrounding the European Union and the policies of US President Donald Trump could always provide some short-term support for bullion, Shu said.
“The real question is whether Trump's policy ... will alter the Fed's interest rate policy, and if so, it would have a long-term effect on gold,” he added.
Spot gold may retest resistance at $1,249 per ounce, as it could have completed a correction triggered by this barrier, according to Reuters technical analyst Wang Tao.
“We suspect that investors continue to expect more reflation (and inflation) coming out of the US and are therefore reluctant to get too bearish on the precious metal,” said INTL FCStone analyst Edward Meir.
Meanwhile, spot silver rose 0.2 per cent to $18.02 per ounce, while platinum also inched up 0.2 per cent to $1,012.20 an ounce. Palladium fell 0.2 per cent to $788.00 per ounce, after touching its highest since January 24 at $792.70 earlier in the session.