By Frank Tang and Clara Denina
NEW YORK/LONDON (Reuters) - Gold fell nearly 1 percent on Tuesday, reversing early-session gains as a rally in U.S. equities after encouraging December retail sales data dampened buying sentiment among bullion investors.
The S&P 500 index was up 1 percent after the Commerce Department said core-retail spending posted a big jump, a sign the economy gathered steam at the end of last year and was poised for stronger growth in 2014.
Analysts said gold's 3 percent gain early in 2014 was supported by a drop in equities. It followed a record run-up in stocks last year, when gold prices tumbled 28 percent.
"There is definitely negative correlation between gold and equities. As of right now, it looks like it is going to continue," said Adam Sarhan, chief executive of New York-based Sarhan Capital.
Spot gold was down 0.8 percent to $1,242.94 an ounce by 2:44 PM EST (1944 GMT).
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U.S. COMEX gold futures for February delivery settled down $5.70 at $1,245.40 an ounce, with trading volume about 10 percent below its 250-day average, preliminary Reuters data showed.
Tuesday's losses reversed the previous session's rise to a one-month high, when a 1-percent loss in U.S. equities triggered safe-haven buying.
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Pravin Char, Keiron Henderson and Nick Zieminski)