* Yellen flags possible U.S. rate hike next month
* Dollar climbs to 3-1/2 week high, stocks rally
* GRAPHIC-2017 asset returns: tmsnrt.rs/2jvdmXl
By Jan Harvey
LONDON, Feb 15 Gold's spot price slipped on
Wednesday, paring the previous day's slim gains, after Federal
Reserve Chair Janet Yellen's suggestion that U.S. interest rates
could rise sooner rather than later drove the dollar to a 3-1/2
Yellen told the Senate banking committee on Tuesday that
delaying rate increases could leave the Fed's policymaking
committee behind the curve.
Gold is highly sensitive to rising U.S. interest rates, as
these increase the opportunity cost of holding non-yielding
bullion, while boosting the dollar, in which it is priced.
The spot price of gold was down 0.1 percent at
$1,226.70 an ounce at 1235 GMT.
"Gold prices are still under pressure after Yellen's
comments yesterday. The U.S. dollar is doing well," ABN Amro
analyst Georgette Boele said.
"Today we have CPI and retail sales in the U.S. as well.
Better data will likely push gold consistently below $1,220."
Yellen's comments boosted appetite for assets perceived as
higher risk, like equities, as well as the dollar.
World stocks hit 21-month peaks and the U.S. currency rose
for the eleventh straight day after Yellen flagged a possible
interest rate rise next month. The dollar has notched up its
longest winning streak in almost five years.
CME Group's FedWatch data showed U.S. interest rate futures
implied an around 30 percent chance of at least three increases
"We remain cautious (on gold), given our expectation for
solid growth, rising interest rates and a strengthening U.S.
dollar ," Julius Baer said in a note.
The world's largest physically-backed gold fund, SPDR Gold
Shares , said its holdings were unchanged on Tuesday. While
it has seen inflows of 18 tonnes so far this year, that is well
below the pace of increases a year ago, which saw inflows of 69
tonnes in the same period.
Regulatory filings showed on Tuesday that Paulson & Co cut
its stake in the fund as bullion prices posted their weakest
quarterly performance in 3-1/2 years, while Soros Fund
Management LLC got out of gold in the fourth quarter of 2016.
U.S. gold futures for April delivery were up $2.60 an
ounce at $1,228.00
Among other precious metals, silver was down 0.4
percent at $17.88 an ounce, off the previous session's
three-month high of $18.07, while platinum was down 0.3
percent at $997.25 an ounce.
Palladium was up 0.5 percent at $782.50 an ounce,
bucking the falling trend among other precious metals to rise in
line with other cyclical assets. The metal, primarily used in
autocatalysts, is more exposed than the others to the broader
(Additional reporting by Arpan Varghese and Nallur Sethuraman
in Bengaluru; Editing by Greg Mahlich)