By Karthika Suresh Namboothiri
(Reuters) - Gold inched lower on Monday as stronger-than-expected U.S. manufacturing data offset support from sluggish retail sales numbers, while palladium surged 3 percent.
Spot gold dipped 0.2 percent to $1,289.20 per ounce at 1:49 p.m. EDT (1749 GMT). U.S. gold futures settled 0.3 percent lower at $1,294.20 per ounce.
"The poor retail sales print definitely did give gold a short-term tailwind, especially at levels where not too many parties are looking to aggressively sell," said Tai Wong, head of base and precious metals derivatives trading at BMO.
"However, gold's tentative probe higher has been blunted by a strong ISM (manufacturing) print, which has sent yields retracing higher. Gold appears to need some additional help to retake $1,300."
U.S. retail sales unexpectedly fell in February, reinforcing the view of flagging U.S. economic growth in the first quarter.
This pressured the dollar, bolstering gold's appeal among buyers holding other currencies.
However, bullion gave up some gains after data pointed to a rebound in U.S. manufacturing activity in March.
The data followed weaker-than-expected consumer spending numbers in January and modest income growth in the United States, fanning worries that slowing global growth was spreading to the world's largest economy.
Euro zone headline and core inflation slowed in March, estimates showed on Monday, supporting the European Central Bank's decision to delay a planned tightening of monetary policy.
"We still think the global economy is slowing in the 12 to 18 month horizon, especially in the U.S., which should help gold in the longer term," Julius Baer analyst Carsten Menke said.
Bullion was supported on reports of progress in U.S.-China trade negotiations.
Immediate support for gold was around the lows of lows seen last week, with key support around the $1,277-80 range, BMO's Wong said. On the upside, gold could face resistance between $1,300-$1,310, especially the 50-day moving average just under $1,310, he added.
Expectations the U.S. Federal Reserve will refrain from interest rate hikes and uncertainties surrounding economic growth are likely to help gold have a strong rally, analysts said.
Speculators increased their net long position in COMEX gold for the second straight week in the week to March 26, data showed on Friday. [CFTC/]
Among other precious metals, spot palladium jumped 3 percent to $1,426.25 per ounce after declining more than 11 percent last week.
"There's more upside here than downside, especially if the Chinese economy improves", Wong said.
Silver inched 0.1 percent lower to $15.11 per ounce, while platinum was down 0.1 percent at $844.50.
(GRAPHIC: 2019 asset returns, http://tmsnrt.rs/2jvdmXl)
(Reporting by Karthika Suresh Namboothiri and Arpan Varghese in Bengaluru; Editing by Jeffrey Benkoe)