By Ira Iosebashvili 

Gold prices reversed gains Monday, as strong U.S. economic data bolstered the case for the Federal Reserve to raise interest rates in coming months.

Gold for December delivery was recently down 0.3% at $1,263.90 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices were as high as $1,272.80 a troy ounce earlier in the session.

U.S. manufacturers started the last quarter of the year on a positive note in October, as output and new order growth hit one-year peaks, data from Markit showed Monday. The solid numbers helped to strengthen the view that the Fed has a clear path to raise interest rates before the end of the year.

Federal-funds futures, used to bet on central bank policy, on Monday showed that investors assigned a 74.2% likelihood of a rate increase in December, up from around 50% in the middle of last month.

Expectations of higher rates are often detrimental to the price of gold, which struggles to compete with yield-bearing investments when borrowing costs rise.

Some analysts believe the pressures of an impending rate rise may be balanced out by other factors, including increasing physical demand for the metal from China. For the first eight months of 2016, Hong Kong's net gold exports to mainland China totaled 555,300 kilograms, an increase of 15% compared with the same period last year, according to HSBC.

Prices for the safe-haven metal may also be supported by geopolitical uncertainty surrounding elections in the U.S. and France, analysts at HSBC said in a note to clients.

"Gold prices seem likely to trade sideways for now," the report said.

Silver for December delivery rose 0.6% to $17.61 a troy ounce, January platinum rose 0.7 % to $938.50 a troy ounce, and December palladium rose 0.5% to $623.90 a troy ounce.

Write to Ira Iosebashvili at ira.iosebashvili@wsj.com

(END) Dow Jones Newswires

October 24, 2016 11:08 ET (15:08 GMT)

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