Gold hovered near 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 flat at $1,086.90 an ounce by 0606 GMT. Bullion has stayed largely below $1,100 since breaching that key support level in a late July rout that pulled it to as low as $1,077, its weakest since February 2010.
US gold for delivery in December slipped 0.4 percent to $1,086.50 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. The dollar index rose to its highest since April against a basket of major currencies.
Gold may languish below $1,100 as investors wait out Friday's US nonfarm payrolls, said MKS Group dealer Samuel Laughlin.
Bullion could test $1,080 on Wednesday, he said, following Lockhart's comments although some Chinese demand where onshore premium is around $2 an ounce over the global benchmark is providing some support.