By Marcy Nicholson and Jan Harvey
NEW YORK/LONDON (Reuters) - Gold eased back toward last week's one-month low on Tuesday as U.S. retail sales data lifted the dollar index, and as caution ahead of this week's Federal Reserve announcement on interest rates kept buyers on the sidelines.
The Fed meets on Wednesday and Thursday to discuss the timing of the first U.S. rate increase in nearly a decade, which could hurt gold prices. Rock-bottom rates pressure the dollar and cut the opportunity cost of holding non-yielding bullion.
Speculation that a rate rise could come as early as this month has helped knock gold down 6 percent this year, but turbulence in the wider markets and fears of a slowdown in China have called the timing of the move into question.
"It's drifting on lack of real interest ahead of the Fed," said James Steel, chief metals analyst for HSBC Securities in New York, adding that the strong dollar also pressured prices.
Spot gold > was down 0.5 percent at $1,103.20 an ounce at 2:55 p.m. EDT (1855 GMT), near Friday's one-month low of $1,098.35. U.S. gold futures
Spot silver > was down 0.6 percent at $14.32 an ounce.
"This is a consolidation," said ING's head of commodity strategy, Hamza Khans. "People got long fundamentally, and are now taking profits off the table until they see how much volatility the dollar will introduce to the market."
The U.S. dollar <.DXY> turned positive against a basket of major currencies as growth in domestic retail sales last month signalled solid consumer spending in the third quarter, which might encourage the Fed to lift interest rates on Thursday. [FRX/]
A small majority of forecasters are sticking to their guns and predicting the Fed will pull the trigger this week.
Stock markets edged up on Wall Street and Europe, while 10-year U.S. Treasury yields > rose to a six-week high. [MKTS/GLOB]
"The whole world is talking about the meeting on Thursday," MKS' head of trading, Afshin Nabavi, said. "We started at a 75 percent chance (of an increase this month), and now I've heard 25 percent. There is a lot of talk about next March, but we'll have to wait and see."
Industrial precious metals were buoyed by copper prices that rallied on late short-covering despite demand concerns in top consumer China. [MET/L]
Spot platinum > was up 0.5 percent at $957 an ounce and palladium > was up 2.4 percent at $600 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Dale Hudson, Louise Heavens and Jonathan Oatis)
