January 2, 2018 / 4:29 AM / a year ago

PRECIOUS-Gold hits more than 3-month high on strong technicals

    * COMEX gold net longs rise in week to Dec 26
    * Spot gold at overbought levels - technicals
    * Palladium hits 17-year peak

 (Adds analyst comment, updates prices)
    By Sethuraman N R
    Jan 2 (Reuters) - Gold prices began 2018 on a stronger note
on Tuesday after prices hit their highest in more than three
months, supported by technical factors after breaking above
$1,300 an ounce last week. 
    Spot gold        rose 0.5 percent to $1,308.31 an ounce at
0739 GMT, having hit its highest since Sept. 26 at $1,310.30
earlier in the session. 
    U.S. gold futures         rose 0.1 percent to $1,310.50 an
    Gold has strengthened technically after closing above
200-day and 100-day moving averages over the past two weeks,
also breaching key psychological resistance at $1,300 on Friday,
analysts and traders said.
    Spot gold rose 13 percent last year to mark its best annual
performance since 2010. A wilting U.S. dollar, political
tensions and receding concern over the impact of U.S. interest
rate hikes fed the rally. 
    The greenback, in which gold is priced, had its worst
performance since 2003 last year, damaged by tensions over North
Korea, questions over Russian involvement in U.S. President
Donald Trump's election campaign, and persistently low U.S.
    "Gold has clearly benefited from lower U.S. yields and a
much weaker U.S. dollar into the year-end and one also suspects,
quite a bit of urgent short-covering in a thin market," said
Jeffrey Halley, senior market analyst at OANDA. 
    Gold has risen more than $70 from nearly five-month lows hit
in mid-December. Analysts and traders, though, remain cautious
on how long the upward trend will continue. 
     More than half of the $70 rally came in the last week,
during the holiday period with much lower-than-normal average
daily volumes, Halley said, adding that gold is also overbought.
    The 14-day relative strength index (RSI) for spot gold
touched 72.54 on Tuesday, it highest since September 2017. An
RSI above 70 indicates a commodity is overbought. 
    For a graphic on gold's relative strength index click (reut.rs/2CaroHt).
    "The RSI has been an excellent indicator of short-term price
corrections in 2017," Halley said. 
    Meanwhile, data from the U.S. Commodity Futures Trading
Commission on Friday added a touch of bullishness to gold,
showing that hedge funds and money managers raised their net
long positions in COMEX gold for the second straight week in the
week to Dec. 26.              
    There is some real potential for gold prices to go even
higher throughout January due to physical buying ahead of
Chinese New Year, MKS PAMP trader Alex Thorndike said.
    "From here, dips below $1,290 should be well supported,
while next major resistance stands around $1,325 and $1,330."
    Among other precious metals, spot silver        was up 0.5
percent at $17.04. 
    Spot platinum        rose 0.2 percent to $927.49. 
    Palladium        rose 1 percent to $1,072.50, after hitting
its highest since Feb. 2001 at $1,074.30

 (Reporting by Nallur Sethuraman in BENGALURU; Editing by
Richard Pullin and Tom Hogue)
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