LONDON (Reuters) - Gold rose on Wednesday from a five-week low in the previous session as a slump in oil prices pushed down stock markets and U.S. bond yields, while 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," said ABN AMRO analyst Georgette Boele.
Spot gold was up 0.3 percent at $1,246.86 an ounce at 1050 GMT, while U.S. gold futures were 0.4 percent higher at $1,248.2 an ounce.
Gold was on track for its biggest gain since June 6. The metal has fallen nearly 4 percent from a high of $1,295.97 early this month.
But traders were sceptical that gold had hit bottom.