On Friday, gold reached its highest level seen 2-1/2 months, keeping it on track for its largest annual rise since 2010 driven by a weak dollar, political tensions and thinning concerns regarding U.S. interest rate hikes. The dollar, in which gold is priced, is on course for its worst year seen since in over a decade, dented by tensions in North Korea, the Russian scandal regarding the 2016 U.S. Presidential election, as well as the relentlessly low U.S. inflation.
On Friday, the dollar’s fall to three-month lows compared to a basket of currencies boosted gold to the highest level seen since mid-October. At 1430 GMT spot gold was up 0.2 percent at $1,302.72 an ounce, while U.S. gold futures for February delivery were up $7.80 an ounce at $1,305.00.
“In the last couple of weeks, trade has been relatively thin, yields have been under pressure and the dollar as well, so gold has profited from that,” said analyst Georgette Boele. “If you look over the year, dollar weakness has been the main theme.”
Next year, gold will be at risk to a rally from the greenback and also from gains in yields, Boele added. The opportunity cost of investing in non-interest-bearing gold rises when yields increase elsewhere. The influence of this year’s three U.S. interest rate hikes was balanced by the dollar’s weakness, according to Boele. “The dollar is the most important driver, and then real yields. The Fed is increasing rates, but the dollar’s not profiting.”
Gold, which is also on track for its best month since late summer, has also gained lately from technically driven momentum, according to analysts.
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One of the world’s top precious metal dealer’s technical team stated that chart signals for gold look positive after surpassing its 100-day moving average this week at $1,295 per ounce. “Momentum indicators are bullish as gold appears poised to target the October high (of) $1,306,” said the team.
Palladium has seen the largest increase of this year, soaring 56 percent as apprehensions increased over availability following years of market shortage. Spot palladium was dropped 0.5 percent at $1,059.65 an ounce, after reaching its highest level since February 2001 at $1,072 during the previous session. Spot silver gained 0.7 percent at $16.97 and platinum showed gains of 1.2 percent at $933.90.