MANILA (REUTERS) - Gold hovered near 5-1/2-year lows early on Friday and is on course for a sixth straight weekly fall, its longest retreat since 1999, after strong US economic data strengthened expectations for a near-term hike in interest rates.

Bullion is also set to end July with its biggest monthly decline in more than two years after a deep rout last week further shook investor confidence, with more losses seen ahead.

Spot gold was up 0.1 per cent at US$1,088.86 an ounce by 0037 GMT on Friday, but not far above last week's trough of US$1,077, its lowest since February 2010. It was down nearly 1 per cent for the week and 7 per cent for the month.

The metal hit a low of US$1,081.85 on Thursday as the US dollar climbed after data showed the US economy grew 2.3 per cent in the second quarter. First-quarter gross domestic product was revised to show growth of 0.6 per cent instead of a contraction.

That supported views that the Federal Reserve could raise interest rates as early as September, analysts say. The Fed meets next that month after concluding this week that the world's largest economy is "expanding moderately."

A potential hike in US interest rates dims the appeal of non-interest bearing assets such as gold.

US gold for August delivery was flat at US$1,088 an ounce.

Gold mining companies are turning increasingly to derivatives to lock in future revenues, as an industry still smarting from losing out on a 12-year bull run gets creative over protecting its income during the metal's current downturn.