Gold holds near 2-1/2-week low as U.S. rate outlook weighs

By A. Ananthalakshmi

SINGAPORE (Reuters) - Gold steadied on Tuesday after a four-day losing streak as the dollar eased, but the metal was not too far from a 2-1/2-week low as it struggled to find direction amid uncertainty over a looming U.S interest rate hike.

Spot gold was little changed at $1,119.40 an ounce by 0643 GMT. It slid to $1,116.20 on Monday, its lowest since Aug. 19. U.S. gold eased 0.3 percent to $1,118.30.

The dollar index fell 0.4 percent.

Investors had been waiting on Friday's U.S. jobs report to gauge the strength of the economic recovery and whether it would prompt the Federal Reserve to hike rates at its policy meet later this month. But the data failed to provide adequate clarity regarding a Fed move amid volatility in financial markets.

"We are unlikely to see a big move until the Fed meeting," said a bullion trader in Hong Kong. "Gold is not even reacting much to what we are seeing in the equities market."

Gold prices have been dented this year by expectations the Fed will hike rates for the first time in nearly a decade. The Fed meets next on Sept. 16-17.

Investors believe higher rates could diminish demand for non-interest-paying gold, while boosting the dollar.

"Gold continues to test support around $1,115-$1,117, with dips still well bought. Short term we see $1,115-$1,130 as the likely range," said MKS Group trader Sam Laughlin.

Gold has failed to find a strong safe-haven bid despite the recent weakness in stocks due to worries over the Chinese economy, showing that gold is struggling to find direction outside of U.S. monetary policy.

Bullion investors will be watching China's August data over coming weeks to see if the economy is at risk of a hard landing.

A stock market crash and the unexpected devaluation of the yuan currency in August have heightened concerns about stability in the world's second-largest economy, with some also believing the weakness could prompt the Fed to delay its rate hike.

Data on Tuesday showed China's August exports fell less than expected but a steeper slide in imports pointed to continuing economic weakness.

(Reporting by A. Ananthalakshmi; Editing by Richard Pullin and Anand Basu)