Gold on Tuesday rose above a seven-week low as the U.S. dollar came off its highs.
Bullion was pressured earlier by strong U.S. economic data that reinforced expectations of another U.S. interest rate increase this year and pushed the dollar and U.S. bond yields higher. <.dxy>
Gold had earlier touched $1,267.76, its lowest since Aug. 15 and down more than 6 percent from a one-year high of $1,357.54 in early September.
"The speculators don`t want to take it below key levels, because of uncertainty of the next Fed chair and how inflation will play out after a potential December hike," said Ryan McKay, head of commodity strategy at TD Securities in Toronto, referring to the modest rebound in gold prices.
U.S. gold futures
The CME`s Fedwatch indicator showed markets were pricing in a 77 percent likelihood of a December rate rise after Monday`s data showed a surge in U.S. manufacturing activity.
U.S. and world stocks also rose to records as a positive global growth outlook encouraged investment in riskier assets. [MKTS/GLOB] <.n>
A strong dollar typically makes gold more expensive for holders of other currencies, while higher bond yields reduce the appeal of non-yielding gold.
"The factors that pushed gold towards $1,360 in early September are now reversing," Julius Baer analyst Carsten Menke said.
Menke said he expected a strengthening dollar and normalization of speculative positioning to push gold to $1,200 an ounce by the end of the year.
Prices had also been supported by purchases of physical gold by bullion-backed exchange-traded funds. But ETF holdings tracked by Reuters dropped between Friday and Monday by the most since late July.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)