Gold was little changed on Wednesday, after hitting a three-week high in the previous session, with the U.S. dollar hovering near a 14-year peak against a basket of major currencies.
Spot gold was mostly unchanged at $1,159.05 an ounce by 0311 GMT. Bullion prices rose on Tuesday as high as $1,163.52, the highest since Dec. 14.
U.S. gold futures fell 0.2 percent to $1,160.10 per ounce.
“The market sentiment is too cautious … there are political events that are ongoing, we expect the group appetite to remain cautious at least for the time being,” said Barnabas Gan, an analyst at OCBC Bank in Singapore.
The dollar index, which measures the greenback against a basket of currencies, was at 103.35 after climbing to 103.82 the previous day, its strongest since December 2002.
A firm dollar curbs demand for commodities priced in the greenback by making them more expensive for holders of other currencies.
U.S. factory activity accelerated to a two-year high in December amid a surge in new orders and rapidly rising raw material prices, indicating that some of the drag on manufacturing from prolonged dollar strength and a slump in oil prices was fading.
Other data on Tuesday showed U.S. construction spending hit a 10-1/2-year high in November, providing a boost to a fourth-quarter economic growth estimate. The reports suggested President-elect Donald Trump would inherit a strong economy, with a labor market that is near full employment, from the Obama administration.
Strong U.S. economic data helped underscore expectations that the Federal Reserve would raise interest rates at a faster pace this year, which would dampen the appeal of non-interest paying gold.
The Federal Reserve, which hiked rates early December, signaled three more increases in 2017 from the previous projection of two.
“(Rising interest rates) should cause the greenback to turn firmer, as a result, gold being a dollar-denominated commodity asset should fall,” Gan said.
Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, dropped 1.01 percent to 813.87 tonnes on Tuesday. Holdings are down about 14 percent since the U.S. presidential election in November.
Among other precious metals, silver was up 0.5 percent at $16.35 an ounce, after hitting near three-week highs in the last session.
Platinum dipped over 1 percent at $927.30, after rising over 4 percent in the previous session.
Palladium was down 0.1 percent at $708.72 an ounce. The metal climbed over 4.5 percent on Tuesday.