Gold eases, awaiting fresh clues on U.S. rate rise

By Jan Harvey

LONDON (Reuters) - Gold eased on Monday, extending last week's slide, as indications that the Federal Reserve may still raise interest rates this year despite recent market turmoil offset a retreat in the dollar.

Spot gold was down 0.2 percent at $1,131.03 an ounce at 1147 GMT, while U.S. gold futures for December delivery were down $3.30 an ounce at $1,130.70. The metal fell 2.3 percent last week as a sell-off in Chinese equities rattled wider markets.

The Federal Reserve left open the possibility of a September rate rise at a central banking conference at Jackson Hole, Wyoming, this weekend, though several officials indicated that prolonged financial market turmoil might delay such a move.

In a speech careful not to overreact to a possible Chinese slowdown, Fed Vice Chairman Stanley Fischer said on Saturday that U.S. inflation is likely to rebound as pressure from the dollar fades, allowing for a gradual rise in rates.

The Fed has indicated that an increase is heavily dependent on ongoing data.

"What is really significant is the upcoming U.S. nonfarm payroll data (on Friday)," Naeem Aslam, chief market analyst at Ava Trade, said. "If we see the average hourly income and labour market strengthening further, this will trigger a sell-off for gold."

"Yes, China will be another major focus, but perhaps not (as) much, as the Fed rate hike decision is data-dependent and there is no other data more important than this."

Global financial markets looked set for another rough week on Monday, with stocks, commodities and the dollar losing ground ahead of U.S. data and surveys that are likely to point to further weakness in China.

Gold is still on track to end August higher after worries over a slowing Chinese economy sparked a wave of short-covering earlier this month following the metal's slide to 5-1/2-year lows in July.

Some had initially thought a slowdown in China might prompt the Fed to postpone a rate rise.Hedge funds and money managers raised bullish bets in COMEX gold in the week ended Aug. 25, U.S. Commodity Futures Trading Commission data showed.

However, investor sentiment remains fragile.

"Neither current concerns about China nor a potential postponement of the first interest rate hike in the United States should significantly revive investment demand for gold," Julius Baer said in a note.

Spot silver was down 0.6 percent at $14.50 an ounce, while platinum was down 1.5 percent at $1,000.74 and palladium was up 0.9 percent at $589.

(Additional reporting by Manolo Serapio Jr. in Manila and Melanie Burton in Melbourne; Editing by Dale Hudson and Jason Neely)