LONDON (Jan 18): Gold retreated on Wednesday from the previous day's eight-week high, as a rebound in the US dollar ahead of US inflation data and a speech by Federal Reserve chair Janet Yellen prompted some buyers to cash in gains.

The metal peaked at US$1,218.64 an ounce on Tuesday as the dollar index slid to a four-week low, hurt by US president-elect Donald Trump's claim that the US currency's strength against the yuan "is killing us", and as a soothing speech on Brexit from UK Prime Minister Theresa May sparked a surge in the pound.

It struggled to maintain those gains as the dollar index recovered some lost ground on Wednesday, however.

Spot gold was down 0.3% at US$1,212.50 an ounce at 1041 GMT, while US gold futures for February delivery were down 60 cents an ounce at US$1,212.30.

"It is normal that prices take a breather after the strong gains we witnessed over the past few days," Commerzbank analyst Carsten Fritsch said.

"All in all the sentiment for gold has clearly improved. The US dollar rally has run out of steam, bond yields are coming down, inflation is picking up, political uncertainty is rising. Without any clear hint from Trump regarding his tax cuts and spending plans, and (if we have) more comments towards protectionism, gold can rise further."

Trump's campaign calls for tax cuts and infrastructure spending boosted US shares and the US dollar after the election, while driving a sell-off in Treasuries. As yields rose, gold slid to its lowest in February.

However, his protectionist statements and lack of detail on policy have since led some investors to opt for gold, often seen as a hedge against uncertainty in the wider markets.

Chinese President Xi Jinping offered a vigorous defence of globalisation on Tuesday, pushing back against the "America First" rhetoric of Trump and signalling Beijing's desire to play a bigger role on the global stage.

"The extent to which globalisation retreats, and the mood and sentiment coming out of Davos, may impact gold," HSBC said in a note. "Clearly there is enough investor concern to send gold higher..., but (it) has come a long way fast, and we may need a period of consolidation before trading higher."

Traders are awaiting US consumer inflation data at 1330 GMT and a speech by Fed chair Janet Yellen on interest rate policy to give fresh direction to the US dollar, and to gold.

Silver was down 0.2% to US$17.13 an ounce, while platinum was 0.5% lower at US$969.90 an ounce and palladium was down 0.3% at US$745.60.