Published: Oct 24, 2016 11:21 a.m. ET

Bloomberg News

Molten gold is poured into molds.

Gold futures slumped Monday as the U.S. dollar found some support in the wake of data showing that the pace of growth among American manufacturers was better than expected in October.

December gold GCZ6, -0.33% fell $4, or 0.3%, to $1,263.70 an ounce. A settlement around this level would be the lowest since Tuesday, FactSet data show. Prices tallied a gain of roughly 1% last week.

December silver SIZ6, +0.53% meanwhile, diverged with its yellow-metal cousin, gaining 11.7 cents, or 0.7%, to $17.61 an ounce after ending last week with a narrower 0.3% gain.

A measure of how fast American manufacturers are growing rebounded in October from a three-month low, potentially getting the fourth quarter off to a good start for the U.S. economy. IHS Markit said its flash indexrose to 53.2 last month from 51.5 in September.

The data helped the ICE U.S. Dollar Index DXY, +0.12%  trade off its session lows, with the index last up just under 0.1% at 98.755 after a low at 98.537. It tapped an 8-month high on Friday. The dollar and gold often move inversely because a firmer buck leaves dollar-priced commodities less desirable to purchasers using another currency.

Read: Euro stabilizes near 7-month low after upbeat PMI readings

Economic data are a key influence when it comes to the U.S. Federal Reserve’s pace and timing for an interest-rate increase. Futures markets still see a better than 60% chance that the U.S. further distances itself with other major economy monetary policy with an interest-rate hike in December, according to the CME FedWatch tool.

“The zero yielding metal remains extremely sensitive to rate hike expectations with further losses expected if speculators boost bets over the Fed pulling the trigger this year,” said Lukman Otunuga, FXTM research analyst. “A resurgent dollar could cap upside gains on gold, consequently providing an opportunity for bears to drag prices lower toward $1,250.”

U.S. equities traded mostly higher, lifted by a flurry of merger news. The stock gains helped to limit demand for gold as investors seek out higher-risk investments.

Central bank decision-making comes against the backdrop of intensifying inflation watching.

“We’ve recently gotten data from several countries that suggest inflation may be starting to return, or at least that the global deflation scare may be over. Consumer price inflation in the U.S., Britain, and most crucially, China, has turned higher recently,” said Marshall Gittler, head of investment research at FX PRIMUS, in a commentary.

“The return of inflation would probably be positive for the dollar,” he said.

That’s likely true in the short term, while the risk of deeper inflation could eventually restore gold’s hedging appeal, most analysts say.

Data Monday from the Chicago Federal Reserve, however, showed that a measure of national economic activity improved in September, but its less-volatile, three-month average weakened — offering a sign that U.S. inflation could be contained over the coming year.

In related exchange-traded fund trading, the SPDR Gold Trust GLD, -0.29%  slipped 0.3% after a weekly rise of 1.3%. The VanEck Vectors Gold Miners ETF GDX, -3.15%  gave up 2.1%.

Analysts at Commerzbank pointed out that gold ETFs tracked by Bloomberg saw outflows of 17.7 tons on Friday — “their biggest daily outflow so far this year.”

The analysts said that was due mainly to outflows in the SPDR Gold Trust. “This reduces inflows since the beginning of the month to just shy of 10 tons. That said, this had no significant impact on the price, either,” they said.