December 30, 2019 / 11:21 AM / a month ago

PRECIOUS-Gold hits 2-month peak on dollar weakness, U.S. air strikes

 (Updates prices)
    * U.S. military carries out air strikes in Iraq, Syria
    * SPDR Gold holdings rise to highest since Nov. 29
    * GRAPHIC-2019 asset returns:

    By Diptendu Lahiri
    Dec 30 (Reuters) - Gold rose to a two-month peak on Monday
as a weaker dollar fuelled investor interest in the metal, with
U.S. military strikes in the Middle East also providing some
limited support in holiday-thinned trading.
    Spot gold        was up 0.1% at $1,512.33 per ounce by 1238
GMT after hitting its highest since Oct. 25 at $1,515.80. U.S.
gold futures         were down 0.2% at $1,515.10 per ounce.
    Given the lack of trading volume during the holiday season,
even "a sensitive event" like the U.S. air strikes is not having
enough of an impact to keep gold prices climbing, Bank of China
International analyst Xiao Fu said.
    "(The) little upside movement that we are seeing today is
mostly due to a weaker dollar," she said. 
    The dollar        slipped against six major currencies after
recording its biggest single day percentage drop since March in
the previous session.       
    A weaker dollar makes gold cheaper for investors holding
other currencies.
    The U.S. military on Sunday carried out air strikes in Iraq
and Syria against an Iran-backed militia group, providing modest
support to the precious metal used as a safe investment in times
of geopolitical and economic uncertainty.             
    Investor interest in gold has surged this year due to a raft
of geopolitical uncertainties, including protests in Hong Kong
and tensions on the Korean peninsular, as well as a long-drawn
Sino-U.S. tariff war impacting global economic growth. 
    The metal has climbed nearly 18% so far and is on track for
its biggest annual rise since 2010.
    However, development on the trade-war front and a slow but
steady uptick in the global economy might dampen the rally in
gold going forward, analysts said.
    "Gold as a non-interest yielding asset will face
considerable headwinds as markets contemplate fading downside
risks and softer geopolitical overtones," Benjamin Lu, analyst
at Phillip Futures said in a note. 
    "Gold prices will likely ease bullish gains amid heightened
market optimism for Q1 2020." 
    On the trade front, China's Commerce Ministry on Sunday said
it has "proactively dealt with" trade frictions with the United
States this year.             
    Market participants however remain wary even as Washington
and Beijing move close to ratifying a trade deal.             
    Indicative of investor sentiment, holdings of the world's
largest gold-backed exchange-traded fund, SPDR Gold Trust      ,
rose 0.1% to 893.25 tonnes on Friday, their highest since Nov.
    Among other precious metals, silver        rose 0.6% to
$17.87 per ounce, while platinum        climbed 0.6% to $950.
Palladium        edged up 0.1% to $1,906.16 per ounce.

 (Reporting by Diptendu Lahiri in Bengaluru; Editing by Jan
Harvey and Louise Heavens)
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