Gold prices dropped on Wednesday in see-saw trade, first rising to the highest since Oct. 20, then sliding and hovering near session lows, as the US dollar pared losses. US data showed a rise in retail sales data last month and an uptick in underlying inflation which cemented expectations for further US interest rate hikes. This helped the US dollar bounce off lows against a basket of currencies.
A weaker dollar makes gold cheaper for holders of other currencies. Spot gold was down 0.2 percent at $1,277.51 by 1:41 p.m. EST (1841 GMT), after touching $1,289.09, the highest since Oct. 20. The metal remained up 0.8 percent for the week. US gold futures for December delivery settled down $5.20, or 0.4 percent, at $1,277.70 per ounce.
The outlook for US tax cuts that could stimulate economic growth was clouded after US Senate Republicans created new political obstacles by linking the repeal of a key component of Obamacare to the tax reform plans. "There's speculation that tax cuts could be a long time coming, meaning the Fed will not have to be as aggressive as it might have been," said Robin Bhar, head of metals research at Societe Generale.
ANZ analyst Daniel Hynes said Wednesday's inflation data could be a trigger to break gold from the $1,265 to $1,290 range in which it has traded since mid-October. In other precious metals, silver was down 0.4 percent at $16.95 an ounce, platinum rose 0.2 percent at $927.74 an ounce and palladium was down 0.4 percent at $981.75 an ounce after touching a two-week low of $973.40.
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