GOLD steadied not far above a 5-1/2-year low yesterday, struggling to scale higher at the start of the month after its deepest loss in two years in July, as expectations for a near-term hike in U.S. interest rates kept sellers nearby.

    Gold’s rout deepened last month as the U.S. dollar strengthened after upbeat U.S. economic data and comments by the Federal Reserve signalled it was on course to raise interest rates for the first time in nine years.

    That rate hike could come as early as September, presenting more downside risk for non-interest yielding gold.

    “The story’s simple yet powerful enough to inject a bearish trend for gold,” said Barnabas Gan, an analyst at OCBC Bank.

    The metal fell as low as US$1,079.50 Friday, near last month’s trough of US$1,077, its weakest since February 2010.

    Bullion lost almost 7 percent in July, its steepest monthly drop since June 2013. It fell for a sixth straight week last week, its longest retreat since 1999.

    Investors are eyeing the monthly U.S. nonfarm payrolls report Friday, and a strong print could mean further weakness for gold, said Gan.

    “If indicators show the U.S. economy is improving very strongly, it does give a cue that gold may breach the US$1,000 support,” he said.

    Hedge funds and money managers kept their first bearish stance in COMEX gold in at least a decade during the week ended July 28, suggesting the recent mass exodus from bullion was more than a knee-jerk reaction.

    (SD-Agencies)