June 21, 2017 / 11:13 AM / 2 years ago

PRECIOUS-Gold climbs as oil plunge pressures stock markets

    * Oil price fall reduces inflation expectations
    * Dollar weakens below 1-month high
    * Technical support for gold seen at $1,237

 (Updates prices; adds comment, second byline, NEW YORK
    By Marcy Nicholson and Peter Hobson
    NEW YORK/LONDON, June 21 (Reuters) - Gold rebounded on
Wednesday from a five-week low as an oil price slump pushed down
stock markets and a weaker U.S. dollar made bullion cheaper for
holders of other currencies.             
    The U.S. 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 0.3 percent at $1,246.67 an ounce by
3:27 p.m. EDT (1927 GMT), while U.S. gold futures        
settled up 0.2 percent at $1,245.80. 
    Gold has fallen around 4 percent 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, said Boele.
    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 officials 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 percent objective.                   
    Among other precious metals, spot palladium        was up
2.4 percent at $889 an ounce after an unexpected rise in U.S.
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 emission-controlling catalytic
converters in petrol vehicles and is benefiting from a shift
away from diesel cars, said Natixis analyst Bernard Dahdah.
    Silver        was down 0.2 percent at $16.43 an ounce, after
falling to a six-week low at $16.33, while platinum        was
up 0.6 percent at $924 an ounce.

 (Editing by Pritha Sarkar and Richard Chang)
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