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

[MANILA] 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 US interest rates in September may be unlikely.

Fed officials worried that lagging US 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 US monetary policy. "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 touched US$1,135.20 an ounce, its loftiest since July 17, and was flat at US$1,134 by 0232 GMT.

US gold for December delivery rose half a per cent to US$1,133.80 an ounce.

Spot gold has now recovered more than 5 per cent from a 5-1/2-year low of US$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 US$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 US$1,132 on Wednesday was "technically bullish" for the metal, adding "we may see a move towards US$1,145-$1,150 in the short term." Amid the bullish tone for gold, spot platinum matched Wednesday's five-week high of US$1,014 an ounce and was last up 0.2 per cent at US$1,013.50. Palladium slipped 0.2 per cent to US$609.20 per ounce and silver was steady at US$15.31.

REUTERS