Gold climbs from 4-month low on Fed minutes, Chinese recovery

[LONDON] Gold rose on Thursday as a recovery in Chinese share prices cooled fears of a wider rout in the major bullion consumer, and after minutes from the Federal Reserve's last meeting suggested caution towards a near-term increase in interest rates.

Spot gold was up 0.5 per cent at US$1,163.50 an ounce at 0920 GMT, while US gold futures for August delivery were down 60 cents an ounce at US$1,162.90.

The metal hit its lowest since mid-March earlier this week at US$1,146.75 an ounce, just a few dollars from its low for the year, a key support level.

Gold has been weighed down this year by expectations that the Fed will raise US interest rates for the first time in nearly a decade, lifting the opportunity cost of holding non-yielding gold while boosting the dollar.

The minutes from the Fed's June 16-17 meeting showed that the central bank continues to grapple with its plan to raise rates, in the wake of mixed economic data domestically and market turmoil gathering steam abroad.

"The Fed is certainly worried about the Chinese markets, and the massive selloff over in Asia has made them a little bit more cautious in their approach to raising interest rates," Ava Trade's chief market analyst Naeem Aslam said.

"(As soon as) the rate hike expectations are slammed, we see a surge in the gold price, but the question is for how long? The Fed will have to raise interest rates eventually. This will make the bigger downward trend in gold prevail, and could push the price towards the $1,050 mark."

Commodities across the board were lifted by a rebound in battered Chinese stocks, after China's securities regulator barred investors with stakes of more than 5 per cent from selling shares for the next six months in a bid to halt a plunge in stock prices.

Traders are also awaiting further news on Greece. European Central Bank President Mario Draghi has voiced doubts about the chances of rescuing the country from bankruptcy, as creditors awaited last-ditch reform proposals from Greek Prime Minister Alexis Tsipras, due later on Thursday.

Among other metals, spot silver was up 1.6 per cent at $15.37 an ounce.

Palladium was up 0.7 per cent at US$655.50 an ounce after slipping overnight to its weakest since June 2013. Platinum was up 0.5 per cent at US$1,034.74 an ounce after falling on Wednesday to its lowest since February 2009.

REUTERS