Gold on Tuesday rose above a seven-week low as the U.S. dollar came off its highs.

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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. us10yt

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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.

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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]

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.

Silver was up 0.4 percent at $16.60 an ounce but still near its lowest since Aug. 9.

Platinum was up 0.2 percent at $912.40 per ounce, after dipping to $902.40, the lowest since July 14.

Palladium was up 0.8 percent at $916.60 per ounce, after hitting a two-week low at $904.00. It earlier slipped below platinum after reaching price parity for the first time in 16 years last week.

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)