Gold climbs from five-week low as crude’s plunge pressures stock markets

NEW YORK/LONDON — Gold rebounded on Wednesday from a five-week low as an oil price slump pushed down stock markets and a weaker US dollar made bullion cheaper for holders of other currencies.

The US Treasury yield curve was the flattest in nearly a decade as investors evaluated hawkish Federal Reserve policy and softening inflation.

Gold is highly sensitive to rising rates and yields, which lift the opportunity cost of holding non-yielding assets such as bullion while boosting the dollar, in which it is priced.

“The change in sentiment has helped gold,” ABN AMRO analyst Georgette Boele said.

Spot gold was up 0.30% at $1,246.67 an ounce by 3:27 p.m. EDT ( 1927 GMT), while US gold futures settled up 0.20% at $1,245.80. Gold has fallen around 4% from a high of $1,295.97 early this month.

But traders were skeptical that gold had hit bottom.

“Momentum certainly seems to be lower for the moment,” said MKS PAMP trader Alex Thorndike in a note.

“(But) there does seem to be a little renewed buying interest below $ 1,250, so we feel a period of consolidation is likely,” he added.

Strong technical support at the 200-day moving average at around $ 1,237 would provide the floor from which gold could climb back toward $1,275, Ms. Boele said.

Analysts at Standard Chartered said in a note they expected the Fed to raise rates twice, rather than three times, next year and the gold should rise to $1,300 an ounce by the end of 2017.

Several Fed off icials have said the bank should push ahead with rate rises, but the head of the Chicago Federal Reserve said on Tuesday he was increasingly concerned that soft inflation meant the bank would struggle to get price pressures back to its 2% objective.

Among other precious metals, spot palladium was up 2.40% at $889 an ounce after an unexpected rise in US existing home sales in May.

“This positive indicator also signals that if the economy is improving, auto sales should continue to grow. This leads today’s strength in palladium which benefits from that play,” said Miguel Perez- Santalla, vice-president of Heraeus Metal Management in New York.

Palladium is used for emissioncontrolling catalytic converters in petrol vehicles and is benefiting from a shift away from diesel cars, said Natixis analyst Bernard Dahdah.

Silver was down 0.20% at $16.43 an ounce, after falling to a six-week low at $ 16.33, while platinum was up 0.60% at $924 an ounce. —