Gold dipped slightly on Thursday, easing off a one-week high as the dollar rebounded following strong US retail sales data, while palladium rose to its highest since February 2001. US retail sales increased more than expected in November as the holiday shopping season got off to a brisk start.
"We have not seen this strong pace of strength for the US retail sales data since 2012," said Naeem Aslam, chief market analyst at Think Markets UK. Spot gold dipped 0.03 percent to $1,255.77 per ounce by 2:43 pm EST (1943 GMT). In early trading it touched a one-week high of $1,259.11.
US gold futures for February delivery settled up $8.50, or 0.7 percent, at $1,257.10 per ounce. Palladium was up 1.4 percent at $1,030.80 an ounce. Earlier, it hit a 16-1/2-year high, jumping 2 percent to $1,038 an ounce.
Strong US retail sales data boosted the dollar, making dollar-denominated bullion more expensive for holders of other currencies. "Many went into yesterday's Fed meeting with an expectation for more (interest) rate hikes as opposed to less," said David Meger, director of metals trading at High Ridge Futures in Chicago. "This was a technical retracement off yesterday's highs."
Gold is sensitive to rising rates because they push up bond yields, reducing the appeal of non-yielding bullion. Rising interest rates also tend to boost the dollar, making gold more expensive for holders of other currencies. The US economic data was released after both the European Central Bank and the Bank of England kept rates unchanged.
"Today, spot gold is still significantly higher than where we were going into the Fed meeting yesterday," Meger said. Prior to the Fed decision, spot gold had fallen to $1,239.98 an ounce.
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