PRECIOUS-Gold climbs as oil plunge pressures stock markets

* Oil price fall reduces inflation expectations

* Dollar weakens below 1-month high

* Technical support for gold seen at $1,237

(Updates prices; adds comment, second byline, NEW YORK dateline) NEW YORK/LONDON, June 21 (Reuters) - Gold rebounded on Wednesday from a five-week low as an oil price slump pushed down stock markets and a weaker U.S. dollar made bullion cheaper for holders of other currencies. The U.S. Treasury yield curve was the flattest in nearly a decade as investors evaluated hawkish Federal Reserve policy and softening inflation. Gold is highly sensitive to rising rates and yields, 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 0.3 percent at $1,246.67 an ounce by

3:27 p.m. EDT (1927 GMT), while U.S. gold futures settled up 0.2 percent at $1,245.80. Gold has fallen around 4 percent from a high of $1,295.97 early this month. But traders were skeptical 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 toward $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 should rise to $1,300 an ounce 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.

Among other precious metals, spot palladium was up

2.4 percent at $889 an ounce after an unexpected rise in U.S. existing home sales in May. "This positive indicator also signals that if the economy is improving, auto sales should continue to grow. This leads today's strength in palladium which benefits from that play," said Miguel Perez-Santalla, vice president of Heraeus Metal Management in New York. Palladium is used for emission-controlling catalytic converters in petrol vehicles and is benefiting from a shift away from diesel cars, said Natixis analyst Bernard Dahdah.

Silver was down 0.2 percent at $16.43 an ounce, after falling to a six-week low at $16.33, while platinum was

up 0.6 percent at $924 an ounce.

(Editing by Pritha Sarkar and Richard Chang)