U.S. durable goods orders rebounded in October and jobless claims, though off a 43-year low, remained below a level consistent with a tightening labour market.
The data sent the dollar index to a fresh 13-1/2 year high.
"The dollar rally has been taken to another level on the back of the U.S. durable goods data, which was really stunning," said Naeem Aslam, chief market analyst at Think Markets UK. Gold has shed more than 10 percent from a peak hit in the aftermath of the U.S. election two weeks ago, holding above key support around $1,200.
"It has been a pretty dreadful time for gold. Everything that's good for growth has been negative for gold," said Robin Bhar, head of metals research at Societe Generale in London.
The metal has been hit by expectations that the policies of U.S. president-elect Donald Trump will boost economic growth as well as strong U.S. data supporting the case for a rate hike.
Gold is highly sensitive to rising interest rates, which lift the opportunity cost of holding non-yielding assets such as bullion while boosting the dollar, in which it is priced.
Traders are pricing in a 100 percent chance of a December rate increase, according to the CME Group's FedWatch Tool.