Gold stuck near 5-1/2-year low as Fed hike looms

Gold languished near its weakest level since early 2010 on Tuesday, with no meaningful recovery seen as expectations for a US interest rate increase grow.

The Federal Reserve begins a two-day meeting later in the day where policymakers are likely to signal further that a rate hike later in the year is certain as the US economy strengthens.

Spot gold

US gold for August delivery slipped 0.3% to $1,093 an ounce.

Amid weaker gold prices, holdings of the world's biggest gold-backed exchange-traded fund, the SPDR Gold Trust , fell for a seventh day on Friday to 21.87 million ounces, the lowest since September 2008. 

Also weighing on sentiment, China's net gold imports from main conduit Hong Kong fell to a 10-month low in June, reflecting weak demand from the major consuming nation.

Money managers, who have been cooling on gold for some time, last week held more short positions than long ones in the precious metal for the first time in nearly a decade, Bank of America said, suggesting an expectation prices will continue to fall.

Speculators have confirmed what everyone else has been thinking: expect more falls in commodities, as worries about China and higher interest rates combine with waning sentiment to suggest markets are heading further south.