Gold near five-week high as soft US data eases rate hike fears

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Gold hovered near a five-week high on Thursday, supported by overnight gains from sluggish US retail sales data that triggered speculation the Federal Reserve will not hike interest rates soon.

FUNDAMENTALS

* Spot gold ticked 0.2% lower to $1,212.96 an ounce by 0033 GMT, but remains near a five-week high of $1,218.80 reached on Wednesday. The metal closed the previous session up 1.9%.

* Data on Wednesday showed US retail sales were flat in April as households cut back on purchases of automobiles and other big-ticket items, the latest sign the economy was struggling to rebound strongly after barely growing in the first quarter.

* The dollar fell to a more than three-month low against a basket of major currencies following the data on fears the Fed will delay any rate hike.

* The greenback had rallied earlier on hopes the Fed will raise rates from record lows.

* But US growth in the first-quarter slowed to a crawl as a strong dollar, harsh winter and a steep fall in oil prices hurt profits and discouraged consumers from spending. The Fed has said it will raise rates only when data points to a strengthening economy.

* A delay in the rate hike could further hurt the dollar and boost gold, a non-interest-paying asset.

* Among other precious metals, silver was also trading near five-week highs, boosted by a 3.5% gain overnight.

* Platinum and palladium held on to gains as markets believed a strike in major producer South Africa was possible as mining companies attempt to restructure.

* South Africa's Association of Mineworkers and Construction Union (AMCU) wants the basic pay for entry level workers in the gold mining industry to be more than doubled, setting the stage for tough pay talks.

* AMCU had previously called for a doubling of wages in the platinum sector, sparking a record five-month long strike last year in the platinum industry.