Gold fell to $1,085.80 (-0.45%) approaching a 5-1/2-year low after Federal Reserve Bank of Atlanta President Dennis Lockhart said in an interview with the Wall Street Journal that the U.S. economy is ready for higher short-term interest rates and only significantly weaker data could change his opinion. He intends to vote in favor of a rate hike when Federal Open Market Committee meets in September.

Higher interest rates would curb demand for the non-interest bearing bullion.

Holdings of the SPDR Gold Trust, the largest gold-backed exchange-traded fund in the world, fell further on Tuesday to 21.56 million ounces, the lowest since September 2008.