* Yellen flags possible U.S. rate hike next month
* Dollar flattens after rising to one-month high
* GRAPHIC-2017 asset returns: tmsnrt.rs/2jvdmXl
(Recasts; updates prices; adds comment, byline, NEW YORK
By Marcy Nicholson and Jan Harvey
NEW YORK/LONDON, Feb 15 Gold rose as the dollar
came off its highs on Wednesday, shrugging off earlier pressure
from stronger-than-forecast U.S. inflation and retail sales that
added to expectations for near-term U.S. interest rate rises.
U.S. Federal Reserve Chair Janet Yellen said on Tuesday that
delaying increases could leave the Fed's policymaking committee
behind the curve. On Wednesday, Philadelphia Fed President
Patrick Harker repeated his view that the central bank should
continue to raise interest rates this year.
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.
Spot gold was up 0.2 percent at $1,231.06 an ounce by
3:14 p.m. EST (2014 GMT).
"Given all that news about rates, the market has pretty much
shrugged that off. I think the market could easily absorb a
quarter-point hike," said Bill O'Neill, co-founder of LOGIC
"You're starting to see some of the big fund players come
back into the market."
The dollar index was flat as investors took profits
after it reached a one-month high early in the session against a
basket of currencies, retreating as Yellen offered no additional
insight on the timing of the central bank's next rate hike.
"Yellen has highlighted a lot of risks around the Trump
presidency, but nevertheless her foot is firmly poised over the
accelerator," said Oxford Economics analyst Daniel Smith.
The world's largest physically-backed gold fund, SPDR Gold
Shares , has seen inflows of 18 tonnes so far this year,
well below the pace of increases a year ago.
"Against soft physical demand for gold, the market remains
fixated on the U.S., for now," said Suki Cooper, precious metals
analyst for Standard Chartered, in a note.
"Heightened geopolitical uncertainty has spurred fresh
safe-haven demand, but the market refocusing on U.S. interest
rates will test the 'stickiness' of recent investor inflows."
Regulatory filings showed late Tuesday that Paulson & Co cut
its stake in gold while Soros Fund Management LLC got out of
gold in the fourth quarter of 2016.
U.S. gold futures for April delivery settled up 0.6
percent at $1,233.10.
Among other precious metals, palladium was up 0.9 pct
at $786.15 an ounce, after rising to a three-week high at
$791.20, bucking the falling trend among other precious metals
to rise in line with other cyclical assets.
Spot silver was down 0.05 percent at $17.94, while
platinum was down 0.2 percent at $1,002.05.
(Additional reporting by Arpan Varghese and Nallur Sethuraman
in Bengaluru; editing by Alexander Smith and Diane Craft)