Gold retreated from earlier gains on Thursday as the US dollar turned higher and global stocks gained on upbeat data, even as investors wagered that policy tightening in the United States would be glacial at best. Denting gold's safe-haven appeal, the MSCI world index hit a record high for the fourth time in less than a month as investors took Yellen's remarks as a green light for risk-taking.
China posted stronger-than-expected June trade figures, bolstering the US dollar, which advanced against a currency basket. The greenback earlier hit its lowest since last October after US Federal Reserve Chair Janet Yellen struck a less hawkish than expected tone in testimony before Congress on Wednesday.
A stronger US currency weighs on gold, making the dollar-priced commodity more expensive for non-US investors. Spot gold was down 0.1 pct at $1,218.59 per ounce by 1:51 pm EDT (1751 GMT), off Monday's near four-month low of months at $1,204.45 this week. US gold futures for August delivery settled down $1.80, or 0.15 percent, at $1,217.30 per ounce.
The US economy is healthy enough for the Fed to raise interest rates, though low inflation and a low neutral rate could leave the central bank with diminished leeway, Yellen said on Wednesday.
"Without inflation pressure, Yellen won't likely do anything until 2018. The gold market can take a breather," said Eli Tesfaye, senior market strategist for brokerage RJO Futures in Chicago. "The $1,200 (per ounce) level is good support, but it could be tested," he said.
The comments, part of Yellen's two-day monetary policy testimony, prompted a rally in treasuries, with yields on two-year notes falling. Lower yields reduce the opportunity cost of holding non-yielding bullion. "The consolidation around $1,220 should be viewed as positive for near-term pricing, with the relatively light long positioning instilling confidence in the market that the metal is open to further top-side moves," MKS said in a note.
"Geopolitical concerns out of the Korean peninsula are likely to supportive for the broader precious complex, while the very fluid Trump-Russia collusion story continues to create uncertainty across markets." Silver prices fell 0.94 pct to $15.73 per ounce. Palladium fell to 1.24 percent to $852.80 per ounce while platinum was down 1.58 percent at $902, giving back nearly all of the previous day's gain, the largest since June 2.