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PRECIOUS-Gold climbs to 5-week high as Sept Fed hike hopes fizzle

Published 20/08/2015, 04:40 pm
© Reuters.  PRECIOUS-Gold climbs to 5-week high as Sept Fed hike hopes fizzle
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* Gold has rebounded nearly 6 pct from July's 5-1/2-year low

* Slow physical demand cuts premiums in Asia

* Coming up: U.S. existing home sales at 1400 GMT (Adds Asian physical demand, updates prices)

By Manolo Serapio Jr

MANILA, Aug 20 (Reuters) - Gold rose to its highest in nearly five weeks on Thursday after minutes from the Federal Reserve's policy meeting last month signalled that a hike in U.S. interest rates in September may be unlikely.

Fed officials worried that lagging U.S. inflation and a weak global economy posed too big a risk to commit to a "lift off" on rates, buoying gold that had been out of favour amid an imminent tightening in U.S. monetary policy. ID:nL1N10U1HJ

"Given that the possibility for a hike in September has diminished, I would think there is a higher probability for a December rate hike. And that does give a near-term support to gold prices," said Barnabas Gan, analyst at OCBC Bank in Singapore.

Spot gold XAU= rose as far as $1,141.75 an ounce, its loftiest since July 17, and was up 0.4 percent at $1,138.50 by 0619 GMT.

U.S. gold for December delivery GCcv1 was up nearly 1 percent at $1,138.20 an ounce, after peaking at $1,141.80 earlier.

Spot gold has now recovered nearly 6 percent from a 5-1/2-year low of $1,077 reached in a late July rout.

The precious metal is on track for a second weekly gain after ending its longest retreat since 1999, having benefited last week from uncertainty posed by China's surprise devaluation of its currency.

A potential delay in a rate increase to December offers upside potential for non-interest bearing gold, with OCBC's Gan seeing initial resistance at $1,150, a level last seen in May.

Many analysts had been betting on a rate hike when Fed officials next meet in September given sustained strength in the world's largest economy. But some thought policymakers might take a gradual approach in lifting rates after China's yuan devaluation.

MKS Group trader Samuel Laughlin said gold closing above $1,132 on Wednesday was "technically bullish" for the metal, adding "we may see a move towards $1,145-$1,150 in the short term."

Amid the bullish tone for gold, spot platinum XPT= also hit a five-week high of $1,025.20 and was last up 0.5 percent at $1,016.50. Palladium XPD= gained 0.7 percent to $614.78 per ounce and silver XAG= rose 0.6 percent to $15.38.

But rising prices curbed physical gold demand in India and Chinese buyers, many of whom were reeling from losses in the stock market, remained scarce, cutting premiums on bullion sold in the world's top two consumers. GOL/AS

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