December 23, 2016 / 11:00 AM / a year ago

PRECIOUS-Gold prices edge higher as U.S. dollar eases

* Dollar edges off 14-year peak, taking pressure off gold
    * Trading volumes seen limited ahead of Christmas holidays
    * GRAPHIC-2016 asset returns:

 (Updates prices; adds byline, NEW YORK dateline)
    By Chris Prentice and Jan Harvey
    NEW YORK/LONDON, Dec 23 (Reuters) - Gold edged higher on
Friday as the dollar retreated from this week's 14-year high and
some buyers were tempted to take advantage of prices near a
10-month low after six weeks of decline.
    Volumes were thin as traders prepared for a long weekend.
All floor trading for precious and base metals options will be
shut on Monday, Dec. 26 for the Christmas holiday. 
    Bullion has fallen more than $200 an ounce from the peak it
hit after Donald Trump's U.S. presidential election victory on
Nov. 8, reaching a low last week of $1,122.35, as his win
sparked a dollar rally and drove U.S. Treasury yields higher.  
    It is down 14 percent this quarter, paring its gain for the
year to 6.7 percent. Gold posted its biggest quarterly increase
in 30 years between January and March.
    Spot gold was up 0.32 pct at $1,132.24 per ounce by 1:50
p.m. EST (1850 GMT), but still set to finish the week lower for
a sixth straight week. 
    The most-active U.S. gold futures for February
delivery settled up $2.90, or 0.26 percent, at $1,133.60 per
    "The market is trying to base right now," said Eli Tesfaye,
senior market strategist for brokerage RJO Futures in Chicago.
"Unless there are geopolitical concerns, the path of least
resistance is to the downside."
    The dollar eased against a basket of currencies, off highs
hit after this month's Federal Reserve policy meeting. The bank
surprised markets by indicating interest rates could rise more
quickly than expected next year. 
    Rising interest rates increase the opportunity cost of
holding non-yielding bullion, while boosting the dollar, in
which it is priced.
    "There is a risk that the prices of gold and silver might
fall further in the short term as the Fed hikes rates more
aggressively in response to some of Trump's more inflationary
policies," Capital Economics said in a weekly note.
    Buying in India remained subdued this week despite a sharp
fall in prices as a severe cash crunch and holidays kept
purchasers away from the market, while premiums in China fell
from near three-year highs touched in the prior week. 
    Investors also showed little appetite for gold. Holdings of
the world's largest gold-backed exchange-traded fund have fallen
more than 12 percent since November. 
    Silver was down 0.37 pct at $15.721 per ounce, while
platinum was down 1.27 pct at $890.49 and palladium was
up 0.35 pct at $657.22. 

 (Additional reporting By Nallur Sethuraman in Bengaluru;
Editing by David Evans and Phil Berlowitz)
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