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

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 rose as far as USD 1,141.75 an ounce, its loftiest since July 17, and was up 0.4 percent at USD 1,138.50 by 0619 GMT.

US gold for December delivery was up nearly 1 percent at USD 1,138.20 an ounce, after peaking at USD 1,141.80 earlier.

Spot gold has now recovered nearly 6 percent from a 5-1/2-year low of USD 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 USD 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 USD 1,132 on Wednesday was "technically bullish" for the metal, adding "we may see a move towards USD 1,145-USD 1,150 in the short term."

Amid the bullish tone for gold, spot platinum also hit a five-week high of USD 1,025.20 and was last up 0.5 percent at USD 1,016.50. Palladium gained 0.7 percent to USD 614.78 per ounce and silver rose 0.6 percent to USD 15.38.

But rising prices curbed physical gold demand in India and Chinese buyers, many of whom were reeling from losses in the stock market, remained scarce, cutting premiums on bullion sold in the world's top two consumers.