Gold prices slipped back towards $1,340 an ounce on Wednesday, retreating from the previous session's one-month high, as gains in the dollar versus a basket of currencies prompted some investors to cash in gains.
The metal has climbed 6 percent in the last four trading sessions, its biggest such rise since October 2011, after assurances from the Federal Reserve that any tapering of its gold-friendly quantitative easing policy would depend on data.
Spot gold was down 0.5 percent at $1,341.26 an ounce at 1209 GMT, while U.S. gold futures for August delivery were up $6.50 an ounce at $1,341.20. Spot prices rose as high as $1,347.69 an ounce on Wednesday, their highest since June 20.
"The dollar retreat after (Fed chief) Ben Bernanke's recent comments...helped the price recovery in gold as Treasury yields sank," Andrey Kryuchenkov, an analyst at VTB Capital, said.
"This morning, in low volumes, (the dollar) is also exerting an influence, weighing on gold prices, in addition to small-scale profit taking after recent gains."
The dollar index rose 0.1 percent even as the U.S. unit slipped to one-month lows against the euro, helped by a 0.7 percent rise versus the Japanese yen.
Traders are awaiting manufacturing and new home sales data due later in the United States for clearer signs on the U.S. economic recovery, and the outlook for Fed monetary policy.
"Bullion is likely to remain sensitive to expectations over the timing of an eventual withdrawal of the Fed's quantitative easing program," HSBC said in a note. "Gold has faced significant headwinds since the start of this year on expectations that QE may be withdrawn prematurely."
The euro and European shares both rose after data showed euro zone private industry unexpectedly bounced back to growth this month. That contrasted with weak manufacturing data from China earlier, which weighed on oil prices.
CHINESE DEMAND HOLDS UP
Dealers say physical demand from China, the world's second largest gold consumer, has largely held up. Premiums in Hong Kong, a key supplier to China, were stable at $5 an ounce to London spot prices, one trader said.
"We thought demand would drop as prices rose, but looks like consumers like the price stability," a dealer in Singapore said.
Outflows from gold exchange-traded funds - popular investment vehicles which issue securities backed by bullion - continued, with the largest, New York's SPDR Gold Trust, reporting a 1.5 tonne drop in its holdings on Tuesday.
Among other precious metals, silver was down 0.8 percent at $20.28 an ounce. The gold/silver ratio -- the number of silver ounces needed to buy an ounce of gold -- held at 65.9 on Wednesday, close to Friday's near three-year high.
Spot platinum was down 0.3 percent at $1,443.49 an ounce, while spot palladium was down 0.6 percent at $734.72 an ounce.
Aquarius Platinum said on Wednesday fourth-quarter production rose 22 percent boosted by improvements at its Kroondal mine in South Africa but warned of a still "difficult and complex" environment for platinum producers.
Platinum group metals have been supported during gold's fall this year by concerns over the prospect of supply disruptions from major producer South Africa, source of three out of four ounces of the world's platinum output.