By Luc Cohen and Clara Denina
NEW YORK/LONDON (Reuters) - Gold fell 1 percent on Thursday to a near a 5-1/2-year low as the dollar rose after data showed the U.S. economy improved in the second quarter, supporting views that the Federal Reserve would lift rates by year-end.
The U.S. Department of Commerce said gross domestic product expanded at a 2.3 percent annual rate. First-quarter GDP, previously reported to have shrunk at a 0.2 percent pace, was revised up to show a 0.6 percent rise.
Spot gold > dropped as much as 1.3 percent to a session low of $1,081.85 an ounce in earlier trading, not far from its cheapest since February 2010 at $1,077 hit after a selloff on July 20. It was down 0.7 percent at $1,089.11 by 2:07 p.m. EDT (1807 GMT).
With the stronger dollar and the likelihood of a rate hike by the end of the year, "there's no need for any kind of safety whatsoever," said Phillip Streible, senior commodities broker for RJO Futures in Chicago.
After a two-day meeting, Fed policymakers said the U.S. economy had overcome a first-quarter slowdown and was "expanding moderately."
That buoyed the dollar, which was up 0.4 percent against a basket of leading currencies, making dollar-priced gold more costly for non-U.S. buyers.
U.S. gold for August delivery
"As the focus is back on the dollar and its strength, the trajectory for gold is down until a hike actually happens," Citigroup strategist David Wilson said.
Mizuho Bank said in a note that it expected just one rate increase this year, with the Fed adopting a gradual pace of tightening. "And policy will continue to be conditioned on data," it added.
Holdings of the largest gold-backed exchange-traded fund, New York's SPDR Gold Trust
Spot platinum > was up 0.1 percent at $983.24 an ounce, within reach of a 6-1/2-year low of $942.49 hit in the previous week. Palladium > was up 0.2 percent at $617.25 an ounce, and silver > dropped 0.1 percent to $14.72 an ounce.
(Additional reporting by Manolo Serapio Jr in Manila; Editing by Susan Thomas and Lisa Von Ahn)
