Gold retreats from 1-1/2-month high even as traders bet on Fed rate pause

Gold prices pulled back on Wednesday from a 1-1/2-month high scaled in the previous session even as investors bet that recent U.S. economic readings make the case for a pause in the Federal Reserve's interest rate-hike stance.

* Spot gold was down 0.1% at $1,978.09 per ounce by 0043 GMT, after hitting its highest since May 24 at $1,984.19 on Tuesday.

* U.S. gold futures were flat at $1,981.60.

* The dollar index wobbled near more than a one-year low.

* U.S. retail sales rose less than expected in June, increasing 0.2% last month, against the 0.5% forecasted by economists polled by Reuters. Consumer spending, however, appeared to be solid.

* Economists polled by Reuters see the Fed raising its interest rate by 25 basis points to the 5.25%-5.50% range on July 26, with a majority saying it would be the last increase of the current tightening cycle.

* Lower interest rates decrease the opportunity cost of holding non-yielding bullion.

* Big U.S. banks said on Tuesday higher interest rates helped boost profit in the second quarter, causing shares to spike, but a pullback in consumer spending, slower loan growth and increased deposit costs may cloud the outlook for the sector.

* Meanwhile, confidence at big Japanese manufacturers fell in July for the first time in six months, the Reuters Tankan survey showed on Wednesday, in a sign of growing exporter concern about weakening overseas demand.

* Spot silver fell 0.1% to $25.06 per ounce, platinum was up 0.2% at $984.42, while palladium fell 0.2% to $1,317.16.