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Gold struggles near multi-year low as Fed comments buoy dollar

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Gold slipped toward a 5-1/2-year low on Wednesday as the dollar strengthened after comments from a Federal Reserve official backed expectations that the US central bank would hike interest rates as early as next month.

[MANILA] Gold slipped toward a 5-1/2-year low on Wednesday as the dollar strengthened after comments from a Federal Reserve official backed expectations that the US central bank would hike interest rates as early as next month.

Atlanta Federal Reserve President Dennis Lockhart has said it would take "significant deterioration" in the US economy for him to not support a rate hike in September, according to the Wall Street Journal.

Gold, an asset that does not earn interest, has taken a hit given rising risks of a US rate hike. The Fed looks intent on lifting rates this year for the first time since 2006 as the US economy strengthens, particularly its labour market.

Spot gold was down 0.2 per cent at US$1,085.10 an ounce by 0218 GMT. Bullion has stayed largely below US$1,100 since breaching that key support level in a late July rout that pulled it to as low as US$1,077, its weakest since February 2010.

US gold for delivery in December slipped 0.6 per cent to US$1,084.70 an ounce. "We suspect that we will see a steady grind lower across most commodity complexes, including gold, largely attributable to the strength of the dollar and poor technicals that will only encourage more funds to further increase their short side exposure," INTL FCStone analyst Edward Meir said.

In fresh evidence of a recovering US economy, new orders for US factory goods rebounded strongly in June on robust demand for transportation equipment and other goods. The dollar index was hovering near a more than three-month peak of 98.218.

Gold may languish below US$1,100 as investors wait out Friday's US nonfarm payrolls, said MKS Group dealer Samuel Laughlin.

Bullion could test US$1,080 on Wednesday, he said, following Lockhart's comments although some Chinese demand where onshore premium is around US$2 an ounce over the global benchmark is providing some support.

Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, dropped further on Tuesday to 21.56 million ounces, the lowest since September 2008.

Spot platinum and palladium wallowed near multi-year lows on a global glut and weak demand from the automotive sector.

Platinum slipped 0.4 per cent to US$947.50 an ounce, after sinking to US$940.50 on Tuesday, its lowest since February 2009. Palladium was steady at US$594.05 after hitting US$586.33 overnight, its weakest since October 2012.

REUTERS