* Dollar index down 0.2 percent
* Silver off over 8-month low touched Tuesday
* Palladium hits weakest since Nov. 9
(Adds comment, updates prices)
By Swati Verma
BENGALURU, Dec 21 Gold rose on Wednesday to
reverse earlier losses, with the U.S. dollar edging away from
14-year highs touched the day before.
Spot gold was up 0.4 percent at $1,135.83 an ounce by
0621 GMT. It fell 0.6 percent in the previous session.
U.S. gold futures were also 0.4-percent higher, at
$1,138.10 per ounce.
"We are seeing quite a lot of volatility. It is driven by
the direction of the U.S. dollar. (Gold) is just marking time
before it makes its next big move. It is in a very very strong
down channel," said Jeffrey Halley, senior market analyst at
"If we see a break of $1,100, a psychological level, we will
see more liquidations towards Christmas for sure and it could be
an ugly move downwards."
The dollar index, which measures the greenback
against a basket of currencies, was down 0.2 percent at 103.140.
The index touched 103.65 on Tuesday, its highest since December
"Any pullback in the greenback may trigger a scramble into
gold," HSBC analyst James Steel said in a note.
"Gold may near $1,100 per ounce but we do not think the
market will go below that level. If it does break $1,100 per
ounce, we would expect bargain-hunters and price sensitive
buyers to increase purchases."
The Federal Reserve, which hiked rates last week, signaled
three more increases next year.
Higher interest rates next year could boost the U.S.
currency, making dollar-denominated commodities such as bullion,
more expensive for holders of other currencies.
Rising bond yields and a flight to stock markets have also
dampened the appeal of gold.
"The steep dollar continues to pressure commodities
including precious metals, especially gold. The precious metal
faces further downward pressure as it yields no interest in a
world of likely rising interest rates and bond yields," said
Mihir Kapadia, CEO of London-based Sun Global Investments Ltd.
"We expect this trend to continue for the next few months."
Signals are mixed for spot gold as it approaches support at
$1,121 per ounce again, according to Wang Tao, Reuters analyst
for commodities technicals.
"Light trading volume can leave gold and the other precious
metals open wide to swings and erratic behaviour on relatively
little buying or selling," HSBC's Steel added.
Among other precious metals, silver edged 0.1 percent
higher to $16.10 an ounce. The metal hit $15.59 in the previous
session, its lowest since April 11.
Platinum gained 0.4 percent to $919.40.
Palladium shed 0.2 percent to $662.50 an ounce. It
touched a near 1-1/2-month low of $660.22 earlier in the
(Additional reporting by Nallur Sethuraman in Bengaluru;
Editing by Joseph Radford and Amrutha Gayathri)