Gold fell on Friday on a firmer dollar after U.S. President Donald Trump promised a major tax announcement and as economic data boosted expectations of a U.S. rate hike.
Spot gold was down 0.4 percent at $1,225.42 per ounce by 0326 GMT. On Wednesday, it touched its highest since Nov. 11 at $1,244.67.
U.S. gold futures dropped as much as over 1 percent to $1,223.30 an ounce.
"The reversal (in prices) was almost entirely due to the surge in the dollar that took place after President Trump revealed he had a 'phenomenal' tax plan ready for unveiling in a few weeks’ time," said INTL FCStone analyst Edward Meir.
Trump plans to announce the most ambitious tax reform plan since the Reagan era in the next few weeks, the White House said on Thursday, sending stock prices and the dollar higher on hopes for a cut in corporate tax rates.
"Thursday’s trading showed us that (investors) were enamoured more by Trump’s general announcement and have not yet bothered to focus on the fine print," Meir said, adding the selloff in gold could be somewhat premature and could reverse course.
U.S. economic data also underpinned the dollar. Initial jobless claims unexpectedly dropped last week to a nearly 43-year low, while inventories at wholesalers surged in December for a second straight month.
The dollar index was firm at 100.600. The dollar extended its overnight rally and edged up to a nine-day high of 113.79 yen
Chicago Federal Reserve President Charles Evans, a voter on policy this year, told reporters it is reasonable to expect the Fed to raise rates three times this year.
However, St. Louis Fed President James Bullard said interest rates could likely remain low through at least 2017, with no clear sense yet of whether the Trump administration's policies will spark higher inflation or growth.
Gold is highly-sensitive to rising U.S. rates, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.
"We continue to expect gold to remain supported in the first half of 2017, on the back of risk aversion and global uncertainties," said OCBC analyst Barnabas Gan.
"We continue to place Trump-centric concerns as one of the top concerns on our radar, given the uncertainty surrounding his policies."
Spot gold may test support at $1,218 per ounce, a break below which could open the way towards the next support at $1,182, according to Reuters technical analyst Wang Tao.
Spot silver fell 0.5 percent to $17.55 an ounce.
Platinum dropped nearly 1 percent to $1,003, after hitting its highest since Oct. 3 at $1,028.50 in the prior session.
Palladium declined 0.7 percent to $765.
(Reporting by Nallur Sethuraman in Bengaluru; Editing by Joseph Radford)