By Peter Hobson
LONDON (Reuters) - Gold steadied on Wednesday after sliding to a five-week low in the previous session as a slump in oil prices pushed down stock markets and the U.S. dollar weakened, making bullion cheaper for holders of other currencies.
Investors were betting that oil's tumble to seven-month lows would reduce inflationary pressures and make it less likely that the U.S. Federal Reserve will push ahead with aggressive interest rate rises.
Gold is highly sensitive to rising rates, 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 0.1 percent at $1,243.87 an ounce at 1237 GMT, while U.S. gold futures were 0.1 percent higher at $1,244.70 an ounce.
Gold has fallen around 4 percent from a high of $1,295.97 early this month.
But traders were sceptical 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 towards $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 price should rise to $1,300 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. [US/]
In other precious metals, silver was down 0.3 percent at $16.41 an ounce, just above a six-week low hit in the previous session.
Platinum was up 0.4 percent at $921.90 an ounce and palladium was 0.9 percent higher at $875.90 an ounce.
(Reporting by Peter Hobson, editing by David Evans and Susan Thomas)
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