* Gold up 7 pct from July's 5-1/2-year low
* Slow physical demand cuts premiums in Asia
* U.S. July existing home sales at near 8-1/2-year high (Updates prices; adds comment, second byline, NEW YORK dateline)
By Marcy Nicholson and Clara Denina
NEW YORK/LONDON, Aug 20 (Reuters) - Gold hit its highest in five weeks on Thursday as the dollar eased after minutes from the U.S. Federal Reserve meeting suggested policymakers were in no hurry to raise interest rates.
Although agreeing that the economy was nearing a point where rates should move higher, Fed officials last month were worried that lagging inflation and a weak global economy posed risks too big to commit to a rate "lift-off". ID:nL1N10U1HJ
"There is some frustration because the Fed meetings were not exactly conclusive for a rate hike in September," ING Bank senior strategist Hamza Khan said.
Spot gold XAU= rose as much as 1.8 percent to $1,154 an ounce, its highest since July 15, and was up 1.7 percent at $1,152.96 at 2:40 p.m. EDT (1840 GMT).
U.S. gold for December delivery GCcv1 settled up 2.2 percent at $1,153.20 an ounce.
Spot gold has recovered more than 7 percent from a 5-1/2-year low of $1,077 hit in a late July rout, when investors cut their exposure on fears of further price declines.
"What's supporting gold is that from unrelentingly bad news, which we saw until late July-early August. The news flow has been more bullish to gold after the Chinese central bank currency devaluation," Macquarie analyst Matthew Turner said.
"But you'd have to think that because of the rate hike the dollar would rise from here, so it's hard to get too excited."
The dollar .DXY was down 0.4 percent against a basket of leading currencies, as bets dwindled on the Federal Reserve next month raising U.S. interest rates for the first time in nearly a decade, following the release of minutes from the July 28-29 Fed meeting. FRX/
"The focus was clearly on the perceived change of tone in the Fed," said Bill O'Neill, co-founder of commodities investment firm LOGIC Advisors in New Jersey. "The market took those minutes and the majority conclusion is that the Fed won't (raise rates) in September."
O'Neill said technical buying also buoyed prices, setting up the market to test $1,160.
U.S. data showed home resales rose to a near 8-1/2-year high in July while factory activity in the mid-Atlantic region picked up. ID:nL1N10V0OO
Rising prices curbed physical gold demand in India and Chinese buyers, remained scarce, cutting premiums on bullion sold in the world's top two consumers. GOL/AS
Gold's upside bolstered other precious metals, with spot platinum XPT= also hitting a five-week high of $1,033. Palladium XPD= gained 1.7 percent to $620.75 per ounce and silver XAG= rose 1.4 percent to $15.50.