Spot gold marked its highest since September 15 at $1,321.33 on Wednesday, but then dropped as the dollar recovered from over 3-month lows. It fell further after minutes from the Federal Reserve's December policy bolstered expectations for more US interest rate hikes. Gold, which had rallied $85 from nearly 5-month lows hit in mid-December, posted its first day of losses in nearly three weeks on Wednesday.
"People are looking to lock in some gains after a pretty strong rally over the past weeks," said ANZ analyst Daniel Hynes. "Geopolitical issues have certainly been a huge power point of the gold's rally into the year-end ... It is going to be a US dollar type story going forward with markets taking a neutral view."