Spot gold erased its gains on Thursday after President Donald Trump told CNBC he thinks the dollar will get "stronger and stronger."
The precious metal reached its highest level since August 2016 earlier in the day, after U.S. Treasury Secretary Steven Mnuchin advocated a weaker dollar on Wednesday. Trump said he thought Mnuchin had been misinterpreted.
Spot gold fell 0.81 percent at $1,345.30 per ounce at 3:30 p.m. ET. On Wednesday, it jumped 1.3 percent in the biggest daily gain since August. U.S. gold futures for February delivery settled up $6.60, or 0.5 percent, at $1,362.90 per ounce.
"We had priced in the projected interest rate moves of the U.S. Fed, but now we're seeing other central banks talking about raising rates and pulling back on liquidity," said Chris Gaffney president of world markets at St. Louis-based EverBank. "That is shifting sentiment toward other currencies and away from the dollar."
Momentum indicators signaled that gold should rise further, underpinned by fears that global equities could retreat from record highs, a hedge against inflation and concern over protectionism in the United States, analysts said.
"It is possible that the dollar is (also) weakening out of concern for the U.S. fiscal condition, which has not been the case of the last several years," said Trey Reik, senior portfolio manager of Sprott Asset Management USA in Carlsbad, California.
Despite support from the dollar, gold ran into resistance after prices zoomed above their 2017 high and neared peaks hit in 2016 and 2014, said Saxo Bank analyst Ole Hansen. "Having seen such a big surge, the market is just taking some chips off the table," he said. "The explosive move we have seen almost continuously since Dec. 12 is really quite amazing. For this market to have a chance of going higher it desperately needs to consolidate." Gold prices resumed their rise later.