Gold slides to two-week low on talk of US rate hike

London - Gold fell to a two-week low on Monday as upbeat comments from Federal Reserve officials on the US economy boosted expectations that the central bank could lift interest rates sooner rather than later.

The Fed's No.2 policymaker, Stanley Fischer, said on Sunday that the US central bank is close to hitting targets for full employment and 2% inflation.

That followed comments last week from New York Fed President William Dudley that the labour market is improving, and from San Francisco Fed chief John Williams that waiting too long to lift rates could be costly for the economy.

Gold is highly sensitive to US interest rates, increases in which boost the opportunity cost of holding non-yielding gold, while lifting the dollar, in which it is priced.

Spot gold was down 0.5% at $1 333.50 an ounce at 11:30, while US gold futures for December delivery were down $8.10 an ounce at $1 338.10.

The world's largest gold-backed exchange-traded fund (ETF), New York-listed SPDR Gold Shares, reported an outflow of 4.5 tonnes last week, adding to the near 20-tonne drop in its holdings the previous week, data from the fund showed.

"ETF accumulation has stopped while hedge funds cut longs in five out of the past six weeks," Saxo Bank's head of commodity research, Ole Hansen, said. "I think (gold) looks exposed to further short-term weakness."

"(There is a) focus on Jackson Hole, with Fischer and Dudley both having raised the curtain for a potential rate hike."

Central bankers from around the world will gather from August 25 for an annual meeting in the mountains of Jackson Hole, Wyoming, with chair Janet Yellen due to speak the following day.

The dollar rose further against the yen and euro on Monday as traders reassessed expectations for Fed action on rates after policymakers' comments last week.

"The US economic indicators are looking healthy and the probability of a US rate hike will go up further in the coming months, rallying the dollar and putting pressure on gold," said OCBC Bank analyst Barnabas Gan.

Speculators again decreased their bullish positions in COMEX gold and silver contracts in the week to August 16.

Silver hit a seven-week low of $18.77 an ounce and was later down 1.8% at $18.97.

Platinum was down 0.2% at $1 105, while palladium was 0.3% lower at $705.65.