Investing.com - Gold futures erased overnight gains in North American trading on Tuesday, falling back towards a six-month low after data showed that U.S. retail sales rose more than expected in October, boosting optimism over the health of the economy.
Gold for December delivery on the Comex division of the New York Mercantile Exchange dipped 95 cents, or 0.08%, to $1,221.05 a troy ounce by 9:35AM ET (14:35GMT), after falling to $1,211.00 the day before, a level not seen since June 3.
The U.S. Commerce Department said that retail sales rose 0.8% last month, compared to expectations for a 0.6% increase. September retail sales increased 1.0%, whose figure was revised from an initial 0.6% rise.
Core retail sales, which exclude automobile sales, increased 0.8% in October, compared to forecasts for an advance of 0.5%. Core sales in September were revised to a 0.7% advance from the prior 0.5% gain.
A separate report showed that an index of New York-area manufacturing conditions turned positive in November for the first time in four months.
The Empire Fed index rose 8.3 points to 1.5, on a scale where any reading above zero indicates improving conditions, the New York Fed said Tuesday.
The data comes after reports earlier this month showed a rapidly tightening labor market and signs of a recovery in the manufacturing sector, underscoring the economy's strength at the start of the fourth quarter.
According to Investing.com's Fed Rate Monitor Tool, odds for a rate hike at the Fed's December 13-14 meeting rose to 85.8%, up from 81.1% ahead of the reports.
The U.S. dollar turned higher against a basket of major currencies in wake of the upbeat data, hitting a fresh 11-month high.
The dollar index was recently up 0.2% at 100.25 during early trade, after climbing to 100.27 earlier, the most since December 2015. If it rises above 100.51, it would reach its highest level since April 2003.
A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
Market analysts warned that the outlook for gold remains cloudy in the near-term. Prices of the yellow metal are down more than 6% over the past week amid optimism that increased fiscal spending and tax cuts under a Trump administration will spur economic growth and inflation, which would ultimately lead to an era of higher interest rates.
The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar in which it is priced.