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Gold turns lower as dollar gives back losses

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AP

Gold turned slightly lower as the U.S. dollar pared losses on Friday, with investors grabbing profits after the metal jumped more than 1 percent following U.S. retail sales data that were unexpectedly flat in July.

Spot gold was down 0.26 percent at $1,334.91 an ounce. It was on track to finish the week up 0.04 percent.

Spot gold rallied as much as 1.4 percent to $1,355.80 after Friday's retail reading for last month surprised economists and suggested consumer spending was cooling after the second quarter's brisk 4.2 percent rate of increase.

"Real money profit-taking sparked a sell-off that saw gold surrender the day's gains as sideways trade in gold over the past few weeks are encouraging some investors to deploy capital elsewhere," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.

"Prices had a new incentive to break higher, with a weaker dollar and lower than expected data from the U.S., which should further discourage the Fed to do anything on rates," Saxo Bank senior manager Ole Hansen said.

The most active U.S. gold futures for December delivery settled down 0.5 percent at $1,343.20, and last traded down 0.67 percent.

"As long as gold stays above $1,300 there is no reason why funds holding big longs should worry too much." The dollar fell 0.13 percent against a basket of main currencies after data prompted investors to roll back expectations on when the Federal Reserve will raise rates, but was down around 0.2 percent later in the day.

Gold is highly sensitive to rising U.S. interest rates, as the opportunity cost of holding the non-yielding asset increases while boosting the dollar, in which it is priced.

Federal funds futures implied traders saw a 43 percent chance the Fed would raise rates at its Dec. 13-14 policy meeting, down from a 47 percent chance before the data was released.

Minutes from the Fed's July meeting will be released on Aug. 17.

Platinum fell 1.67 percent to $1,118.00 an ounce, after falling 3 percent in the previous session.

Palladium was down 0.15 percent at $685.98 and was set to finish the week with a 1.5 percent loss. The metal had a roller coaster week, hitting a 14-month high on Wednesday at $746.10 and posting the biggest one-day rally in more than five months, before tumbling 5 percent on Thursday.

Spot silver fell 1.18 percent at $19.70.