Gold near two-month lows on rate hike worries

REUTERS - Gold on Wednesday held near two-month lows hit in the previous session, with the dollar firm after upbeat U.S. data and as investors waited for nonfarm payroll numbers later this week for clues on the timing of a Federal Reserve rate hike.

FUNDAMENTALS

* Spot gold was little changed at $1,310.48 per ounce at 0104 GMT. The metal fell 1 percent to hit $1,308.65 on Tuesday, its lowest since June 28.

* U.S. gold futures slipped 0.2 percent to $1,313.90.

* Fed Chair Janet Yellen said on Friday the case for higher rates was strengthening, though she gave little clarity on the timing of a move. In an interview on Tuesday, Vice Chair Stanley Fischer said the U.S. job market is nearly at full strength and that the pace of rate increases by the Fed will depend on how well the economy is doing.

* U.S. consumer confidence rose to an 11-month high in August, with households more upbeat about the labour market, in a further sign that the economy was regaining steam after faltering in the first half of the year.

* Friday's nonfarm report for August, as well as other data, could reinforce hawkish messages from Yellen and other Fed officials.

* The dollar hovered near a three-week high against a basket of currencies on Wednesday. The dollar index was little changed at 96.073 after rising to 96.143 overnight, its highest since Aug. 9.

* Gold is highly-sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.

* Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.12 percent to 955.40 tonnes on Tuesday.

MARKET REPORT

* Asian shares eased on Wednesday following modest losses on Wall Street, but were still on track for a monthly rise.

(Reporting by Nallur Sethuraman in Bengaluru; Editing by Joseph Radford)