The price of gold turned higher on Friday, hovering below the prior session's seven-week top as the U.S. dollar weakened and U.S. Treasury yields came off their highs, with the metal on track for a third straight weekly gain.
The greenback and yields were initially higher on the back of strong U.S. retail sales, which reinforced the prospect of the Federal Reserve raising rates this year, perhaps sooner than previously expected, traders said.
U.S. gold futures
The gold price has risen 6.5 percent since a mid-December low and on Thursday reached its highest level since Nov. 23, after President-elect Donald Trump failed to elaborate on his plans to cut taxes and boost infrastructure spending.
"There's clearly plenty of new long positioning that has come into the market and at these (price) levels there's room to take profit," said Mitsubishi analyst Jonathan Butler.
"Trump's economic policies, in particular tax cuts for corporates, could lead to ever-higher equity valuations that divert funds away from bullion."
Investors were looking ahead to Trump's inauguration on Jan. 20, when they will again be looking for detail on his plans for the U.S. economy.
"Unless you have a good trend narrative, I don't think specs are going to pay much attention, so (the gold market has) reverted back to following the dollar," said Rob Haworth, senior investment strategist for U.S. Bank Wealth management in Seattle.
"I think that bullish dollar trend is what keeps a lid on gold prices."
Analysts at Scotiabank, however, said they expect gold to strengthen further if support at $1,178 an ounce holds.
Several Fed officials on Thursday cautioned that Trump's fiscal and tax plans could spur a short-term economic boost that would result in longer-run inflation and debt problems, potentially raising demand for gold as an inflation hedge.
Higher gold prices depressed physical sales in Asia this week.
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