Gold held firm below $1,200 an ounce on Tuesday as the dollar climbed to a fresh 12-1/2-year peak against the yen and strong US economic data supported expectations of a Federal Reserve rate hike later this year. Spot gold was little changed at $1,189.30 an ounce by 0633 GMT. The metal had climbed to a session high of $1,204.31 on Monday but was unable to hold on to the gains and closed the day slightly lower.
Gold initially rose in the prior session after US consumer spending growth unexpectedly stalled in April, but gave up those gains after data showed manufacturing activity picked up in May for the first time in seven months and construction spending surged in April to a near 6-1/2-year high.
The data kept alive expectations the Fed will hike US interest rates later this year from record lows, boosting the dollar. Higher rates would reduce demand for non-interest-paying bullion. "The lack of follow-through buying after clearing $1,200 is a worrying sign for the yellow metal and it looks again likely to test a break lower through the broad $1,180 to $1,185 support range," said MKS Group trader Sam Laughlin.