Gold price rises as oil price slump boosts safe haven demand

London (June 22)  Gold prices rose for a second straight day on Thursday as risk averse sentiment amid weaker oil prices drove up the demand for the metal, with a softer dollar and weakness in U.S. Treasury yields also lending support.

Spot gold rose 0.5 percent to $1,252.41 per ounce at 0812 GMT. It rose 0.3 percent in the previous session, its largest intraday percentage change since June 6.

U.S. gold futures for August delivery rose 0.6 percent to $1,253.30 per ounce.

"A softer U.S. dollar and a risk-off bias following the recent declines to crude saw gold turn higher during Asian hours
on Thursday," MKS PAMP trader Sam Laughlin said in a note.

Oil turned lower on Thursday after posting gains earlier in the session as traders look ready to test new lows for crude
prices with worries persisting over a global glut.         

"The uncontrolled oil price spill in the futures markets may have seen some traders pushing the risk aversion button and
buying gold," said Jeffrey Halley, senior market analyst at OANDA.   

"The primary driver appears to be the flattening of the longer-dated U.S. Treasury curve."    
    The U.S. Treasury yield curve flattened to almost 10-year
lows on Wednesday as investors evaluated the impact of hawkish
Federal Reserve policy on the economy even as inflation measures
are deteriorating.                 
    U.S. home resales unexpectedly rose in May to the third
highest monthly level in a decade and a chronic inventory
shortage pushed the median home price to an all-time high.
                
    Gold is highly sensitive to rising rates and yields, which
increase the opportunity cost of holding non-yielding assets
such as bullion while boosting the dollar, in which it is
priced.
    "Investors are waiting for any clues on whether the timing
of the next rate hike is September or December," said Ronald
Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.
    Spot gold may bounce more into a range of $1,257 to $1,261
per ounce, as it has cleared a resistance at $1,251, according
to Reuters technical analyst Wang Tao.            
    The U.S. dollar index       , which measures the greenback
against a basket of six currencies, retreated from a one-month
high of 97.871 set on Tuesday.   
    Holdings in SPDR Gold Trust      , the world's largest
gold-backed exchange-traded fund, rose 0.04 percent to 853.98
tonnes on Wednesday.            
    Among other precious metals, silver        gained 1 percent
to $16.61 per ounce. Platinum        touched its highest in a
week during the session and was up 0.6 percent to $929.20 per
ounce, while palladium        slipped 0.8 percent to $880.99 per
ounce.

Source: Reuters