* Spot gold hits highest in two-weeks
* Spot gold set for biggest daily gain in a month
* Dollar index down nearly 0.4 pct
* Spot prices poised to end 2016 higher
(Updates prices, adds details)
By Swati Verma
BENGALURU, Dec 29 Gold prices rose to their
highest in two weeks on Thursday, as the U.S. dollar fell, but
gains were limited on expectations of more rate hikes by the
U.S. Federal Reserve next year.
Spot gold was up 0.5 percent at $1,147.56 an ounce by
0631 GMT, after reaching its highest since Dec. 14. at $1,149.84
earlier in the session.
The metal was also on track for its biggest one-day rise
since Nov. 28.
U.S. gold futures were up 0.7 percent at $1,148.50
"I think it's because of the dollar, which has weakened a
little bit," said Helen Lau, an analyst at Argonaut Securities
in Hong Kong.
The dollar index, which measures the greenback
against a basket of currencies, eased about 0.4 percent at
The dollar sagged against the yen on Thursday, weighed down
by U.S. yields slipping to two-week lows and an ebb in risk
appetite that favoured the safe-haven Japanese currency.
Gold was poised to end the year up after three straight
annual declines. Bullion has risen over 8 percent so far this
year despite an 8 percent drop in November.
"With interest rates rising in the U.S., gold will be a less
attractive investment, and this explains some of the weakness
the commodity has been facing in the recent months," said Mihir
Kapadia, CEO of London-based Sun Global Investments Ltd.
The Federal Reserve raised U.S. interest rates earlier this
month for the first time in a year and signalled three more
increases next year from the previous projection of two.
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.
"Trading conditions should remain fairly uneventful for the
balance of the week," INTL FCStone analyst Edward Meir said in a
"But heading into next week, we think the Italian bank
rescue and the direction of the Chinese yuan will likely dictate
near-term pricing in gold, especially if equity markets start to
get nervous about either of these two developments."
Shanghai Gold Exchange, the world's biggest physical bullion
exchange, said on Wednesday it will curb the amount of gold
investors can trade at one time, a move analysts said would
limit institutional investors' influence on prices.
Among other precious metals, silver rose for a third
straight session, up 0.7 percent at $16.12 an ounce. Platinum
was up 0.9 percent at $905.20, while palladium
gained 1.1 percent at $672.70 an ounce.
(Reporting by Swati Verma in Bengaluru; Editing by Amrutha
Gayathri and Richard Pullin)