PRECIOUS-Gold slips from eight-week high as inflation data lifts dollar

* Dollar edges off four-week low after U.S. inflation data
    * Gold market awaiting more clues on Trump policy
    * Silver rises to two-month high
    * GRAPHIC-2017 asset returns:

 (Updates throughout; adds comment, byline, NEW YORK dateline)
    By Marcy Nicholson and Jan Harvey
    NEW YORK/LONDON, Jan 18 (Reuters) - Gold retreated on
Wednesday from the previous day's eight-week high as data
showing the biggest pick-up in U.S. consumer prices in 2-1/2
years lifted the dollar and U.S. Treasury yields.
    Moves were muted however as the markets awaited a speech by
Federal Reserve chair Janet Yellen later in the session, which
will be closely watched for clues on U.S. monetary policy.
    Spot gold was down 0.6 percent at $1,209.34 an ounce
by 2:45 p.m. EST (1945 GMT), after hitting its highest since
mid-November on Tuesday.
    U.S. gold futures for February delivery settled down
0.07 percent at $1,212.10. 
    The U.S. Labor Department said on Wednesday its Consumer
Price Index rose 0.3 percent last month and 2.1 percent in the
12 months through December, the biggest year-on-year gain since
June 2014. 
    "We expect a lot more aggressive rate hikes from the Fed in
response to already rising inflationary pressures," Capital
Economics analyst Simona Gambarini said.
    "Possibly there will be even stronger inflation due to
Trump's policies -- it very much depends on what gets
implemented at a fiscal level."
    Higher rates would weigh on gold, she said. The metal is
highly sensitive to rising interest rates, as these increase the
opportunity cost of holding non-yielding bullion.
    "We got a little bit of pressure from the dollar. The
market's looking for direction," said Eli Tesfaye, senior market
strategist for brokerage RJO Futures in Chicago.
     Gold prices extended losses after the Federal Reserve's
latest Beige Book pointed to a jump in manufacturing and tight
labor markets showing U.S. economic health. 
    "Federal Reserve officials are looking to get in a handful
of rate hikes this year, and according to the Beige Book the
economy is on track to warrant them," said Royce Mendes,
director and senior economist at CIBC Capital Markets in
    Still, uncertainty over Trump's policies ahead of his
swearing-in on Friday is keeping the metal underpinned.
    "At the moment, the market is driven by uncertainty,"
Gambarini said. "We've seen a rally on the back of the upcoming
inauguration date for Trump. People are getting increasingly
concerned about what will be implemented."
    Trump's protectionist statements and a lack of detail on
policy have led some investors to opt for gold, often seen as a
hedge against uncertainty in the wider markets, since its
post-election slide. 
    Silver turned down 0.1 percent to $17.14 an ounce,
after rising to a two-month high at $17.33.
    Platinum was 1.3 percent lower at $961.49 and
palladium was up 0.2 percent at $749.30.

 (Additional reporting By Nallur Sethuraman in Bengaluru;
Editing by Ruth Pitchford and Tom Brown)