(Recasts throughout, adds comments, updates prices at 0846 GMT)
* Gold unlikely to drop below $1,950 near-term - analyst
* U.S. retail sales data due at 1230 GMT
July 18 (Reuters) - Gold prices rose on Tuesday supported by a softer dollar, while investors awaited U.S. retail sales data that could have a bearing on the Federal Reserve's policy outlook as inflation shows signs of cooling.
Spot gold rose 0.4% to $1,961.67 per ounce by 0846 GMT. U.S. gold futures advanced 0.5% to $1,965.40.
Making gold more affordable for overseas investors, the dollar index wobbled near a more than one-year low after registering its worst week of 2023 last week.
"There seems to be a new support level for gold at $1,950, and it looks unlikely that prices will drop below this level in the near term," said ActivTrades senior analyst Ricardo Evangelista.
"With other major central banks still not done with their hiking cycle, the dollar is likely to remain under pressure and that can benefit gold prices. However, U.S. rates are unlikely to start coming down in short-to-medium term, and that somehow caps the upside for gold prices."
Higher interest rates increase the opportunity cost of holding non-yielding bullion. Markets are pricing in another 25 basis point rate hike at the Fed's July 25-26 meeting.
Treasury Secretary Janet Yellen on Monday said she did not expect the U.S. economy to enter a recession. Traders now await U.S. retail sales and industrial production figures due to be released later on Tuesday.
Elsewhere, investors expect the European Central Bank and the Bank of England to go ahead with their rate-hike cycle.
Short-term gold is seen trading in a range until there is more clarity on how the Fed views the recent data, UBS analyst Giovanni Staunovo said.
"The next leg up in prices needs a revival in exchange-traded fund gold demand."
Spot silver rose 0.3% to $24.9324 per ounce, platinum climbed 0.8% to $983.22, and palladium rose 1.2% to $1,299.68.
(Reporting by Arundhati Sarkar in Bengaluru; Editing by Rashmi Aich)
