Gold cut losses on Tuesday, as the dollar turned lower after U.S. retail sales and producer prices data came in weaker than expected, but prices remained below $1,200 an ounce on higher equities.
The Commerce Department said on Tuesday retail sales increased 0.9 percent, below the 1 percent that economists polled by Reuters had forecast.
Separately, the Labor Department said its producer price index for final demand increased 0.2 percent last month. But in the 12 months through March, producer prices fell 0.8 percent, the biggest year-on-year decline since 2009.
"Retail sales were under expectations... So we are seeing a short squeeze on the back of the dollar coming off," Deutsche Boerse's MNI senior analyst Tony Walters said.
Spot gold, which had fallen 1.2 percent to its weakest level in two weeks at $1,183.68 an ounce in earlier trade, cut declines to trade down 0.4 percent at $1,193.16 at 2:26 p.m. EDT (1826 GMT).
U.S. gold for June delivery settled down $6.70 an ounce at $1,192.60.
The dollar index, stronger initially, was down 0.8 percent, while the pan-European FTSEurofirst 300 index, turned lower after hitting its highest level since 2000 and U.S. shares edged up.
"We expect gold prices to head lower, due to a stronger dollar and improved risk sentiment in financial markets ... which leads to flows out of gold and into riskier assets," Danske Bank senior analyst Jens Pedersen said.
"If you look at the U.S. money market, a hike has not been priced out aggressively so the beginning of the hiking cycle this year could be more negative for gold."
The recent strength in the U.S. dollar, which has benefited from the growing likelihood that the Federal Reserve will raise interest rates this year, has been a headwind for bullion over the past months.
A U.S. rate increase, which would be the first in nearly a decade, dims the appeal of assets such as gold which do not pay interest.
"Although many investors are interested in gold, especially in countries like Greece, Venezuela, Argentina and Middle East or Eastern Europe, the continuing appeal of other assets have kept funds away," said George Gero, precious metals strategist for RBC Capital markets in New York.
Spot silver was down 0.7 percent at $16.20 an ounce, having touched a one-month low of $15.96 earlier. Platinum was down 0.1 percent to $1,148.00 an ounce and palladium dropped 0.9 percent to $760.00 an ounce.