Gold retreated from six-month highs on Thursday after stronger-than-expected US jobs and retail sales data lifted the dollar off early lows, but prices were underpinned by tensions surrounding Russia's stand-off over Ukraine. Earlier, gold had risen to $1,374.85, its highest since September 10, due to fears the Ukraine situation could escalate, worries over the Chinese economy and a drop in the dollar to 2-1/2 year lows against the euro.
It slipped back below $1,370, however, after data showed weekly initial US jobless claims fell to a three-month low and that retail sales rose slightly more than anticipated in February. Spot gold was little changed at $1,367.24 an ounce at 1500 GMT versus $1,366.58 late on Wednesday. US gold futures for April delivery were down $2.50 an ounce at $1,368.
A firmer tone to US data is seen supporting expectations that the Federal Reserve will maintain tapering of its bullion-friendly monetary stimulus programme. Speculation that the scheme was ending helped knock gold 28 percent lower last year. "The tapering story hasn't gone away; it has just faded into the background," Jonathan Butler, an analyst at Mitsubishi, said. "It's looking like the Fed will continue its $10 billion a month rate (of tapering). I wouldn't be looking for an acceleration of that rate at this stage, but if we do see that, you would expect to see gold sustaining some collateral damage."
Gold has been driven higher this week by fears that the tensions between Russia and the West over Ukraine could worsen, making gold more attractive as an alternative to cyclical assets such as stocks.
Russia said on Thursday it had started military exercises near the border with Ukraine, in what is likely to be seen as a show of force in the standoff with Kiev and the West over Crimea. The European Union agreed on a framework on Wednesday for its first sanctions on Russia since the Cold War, a mark of solidarity with Washington in the drive to make Moscow pay for seizing Crimea.
"It is currently the political developments in Ukraine, which are having a negative impact on the stock markets, that are supporting gold," Peter Fertig, a consultant at Quantitative Commodity Research, said. Technical analysts, who study charts of past price moves to estimate the next direction of trade, say gold's current rally could have further to run.
"With bullish trending indicators in place and price pattern of higher highs/lows in place since late December, there's scope for more upside in the near-term as the next major resistance is at $1,433.83, the August 2013 high," UBS said in a note on Thursday. Physical demand has been subdued due to the price rally, with prices in China - the biggest bullion consumer - trading at a discount to spot prices. Investment funds also saw some profit taking, with the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, reporting its first outflow since February 19 on Wednesday.
Among other precious metals, silver was down 0.1 percent at $21.21 an ounce, while spot platinum was up 0.9 percent at $1,479 an ounce and spot palladium was up 0.4 percent at $771.20 an ounce. A strike in the South African platinum sector by workers at Anglo American Platinum, Impala Platinum and Lonmin entered a seventh week on Thursday. The strike is estimated to be costing come 10,000 ounces per day in lost output.