NEW YORK (MarketWatch) -- Gold futures reversed earlier losses on Tuesday, as the dollar fell against major counterparts on bleak U.S. economic data, while traders reconsidered the importance of an expected sale of gold reserves by the International Monetary Fund.
Gold for April delivery gained $8.40 to end at $940.50 an ounce on the New York Mercantile Exchange.
Gold futures had fallen Monday after a senior Treasury official said the U.S. supports the proposed sale of part of the gold reserves held by the IMF.
"But there is an understanding that the IMF issue is minor at best," said Brien Lundin, president at Jefferson Financial. "The sale still needs congressional approval, which remains doubtful, and the amount would be minor anyway."
"In the past, IMF gold sales have typically marked a buying opportunity for people who had missed a rally," Lundin said.
A lower dollar also boosted the appeal of bonds. Gold, as many commodities, is denominated in dollars and a lower U.S. currency makes it more affordable in other currencies.
The dollar fell against major currencies, after an unexpectedly sharp rise in the producer price index and a plunge in consumer confidence heightened fears that the U.S. economy may end up in the grip of stagflation. Read Currencies.
For gold, long-term fundamentals remain favorable, Lundin said.
"The long-term downtrend of the dollar losing favor, expectations that the [Federal Reserve] will cut interest rates by at least another half a point, global economies are a bit stronger than the U.S. economy and that's boosting demand pressures on commodities and [inflation]," he said.
Nick Godt is a MarketWatch reporter based in New York.
