Gold slipped on Wednesday as the dollar held near a one-week high on the back of better-than-expected retail sales data from the United States, while investors waited for direction on interest rates from the U.S. Federal Reserve.
Spot gold fell 0.3% to $1,402.42 per ounce as of 1131 GMT. Prices were on track for a third straight session of losses as robust U.S. data trimmed expectations of an aggressive interest rate cut by the Fed.
"We're seeing a delayed reaction (in gold) considering yesterday's movement in the foreign exchange market," said Quantitative Commodity Research analyst Peter Fertig.
"It is crucial for gold to hold above $1,400. If prices fall slightly below this level, we should see some buying interest coming in and pushing prices higher."
The dollar was marginally lower against a basket of six major currencies at 97.325 after gaining 0.5% the previous day following a rise in U.S. retail sales numbers. The U.S. currency held near a one-week high.
The data dampened expectations that the Fed could cut interest rates by 50 basis points (bps) rather than 25 bps at its month-end policy review.
Chicago Fed President Charles Evans said on Tuesday that an interest rate cut of a half a percentage point at the U.S. central bank's July 30-31 policy meeting could mean that the Fed's inflation goal is reached sooner.
Investors are now awaiting the Fed's Beige Book later in the day for insight on how trade tensions are affecting the business outlook.
Gold is highly sensitive to rising interest rates, which lift the opportunity cost of holding non-yielding bullion. They also boost the dollar, in which the metal is priced.
In the latest on the trade row, U.S. President Donald Trump said on Tuesday the United States still has a long way to go to conclude a deal with China but could impose tariffs on an additional $325 billion worth of Chinese goods if needed.
"Gold remains locked within the $1,400 - $1,420 range, while more broadly we look for a move outside of $1,380 - $1,440 for medium-term direction," trading firm MKS PAMP said in a note.
Meanwhile, silver rose 0.4% to $15.62, extending gains for a fourth straight session. It hovered close to a more than four-month high of $15.69 it hit on Tuesday.
"Silver ETFs have continued to register substantial inflows in recent days – inflows since the start of the month have exceeded 600 tons," Commerzbank wrote in a note.
"It appears that the pronounced ETF inflows are gradually having an impact after all."
Amongst other precious metals, platinum fell 0.4% to $834.99 per ounce, while palladium dropped 0.4% to $1,518.71.
(Reporting by Karthika Suresh Namboothiri in Bengaluru, editing by Louise Heavens and Jan Harvey) ((firstname.lastname@example.org; +91 80 6749 0997 (If within U.S. call 651-848-5832); Reuters Messaging: email@example.com))