BENGALURU (Reuters) - Gold edged lower on Wednesday after upbeat U.S. data supported the view that the world's biggest economy may be strong enough for the Federal Reserve to raise interest rates next week.
A rate hike would weigh on gold, as it would raise the opportunity cost of holding bullion, which yields no interest.
"Everyone is waiting for the FOMC meeting next week and the liquidation in exchange traded funds and a firm dollar has put pressure on prices," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.
"People would be more interested in hearing about whether this would be the hike for now or will there be any subsequent rate hikes," Leung said, forecasting choppy trade going into the year-end holidays.
Spot gold was down 0.1 percent at $1,168.80 an ounce by 0303 GMT, after ending the previous session nearly flat.
U.S. gold futures gained 0.1 percent at $1,171.20.
Several Fed policymakers have expressed confidence in the U.S. economy and signalled a possible near-term interest rate hike.
Investors were also looking at European Central Bank's upcoming policy meeting on its quantitative easing programme.
The ECB is expected to change the terms of its asset-purchase programme to alleviate a bond shortage and extend the purchases beyond March 2017.
"We expect market conditions to remain quiet ahead of the key ECB meeting and gold should take its next cue from how dovish the ECB comes across on Thursday," INTL FCStone analyst Edward Meir said.
Asian shares edged up on Wednesday, while the euro and dollar drifted sideways.
New orders for U.S. factory goods recorded their biggest increase in nearly 1-1/2 years in October, further evidence that the manufacturing sector is gradually recovering after a prolonged downturn.
Strong non-farm payrolls and services sector activity reinforced the view that the Federal Reserve is primed to raise interest rates next week.
Among other precious metals, silver fell 0.1 percent to $16.70 an ounce.
Palladium dropped 0.3 percent to $734.40 and platinum slipped 0.1 percent to $933.20.
(Reporting by Swati Verma; Additional reporting by Nallur Sethuraman; Editing by Richard Pullin and Tom Hogue)