January 3, 2018 / 1:20 AM / a year ago

PRECIOUS-Gold inches up to hit 3-1/2-month highs on weaker dollar

    Jan 3 (Reuters) - Gold prices edged up on Wednesday, hitting
over 3-1/2-month highs, driven by a softer dollar.
    * Spot gold        rose 0.2 percent to $1,320.77 an ounce at
0058 GMT, having hit its highest since Sept. 15 at $1,321.33
earlier in the session.
    * U.S. gold futures         were up 0.5 percent at $1,322.40
an ounce. 
    * The dollar index        fell to a more than three-month
low Tuesday on expectations of a slower pace of interest rate
hikes by the U.S. Federal Reserve.             
    * The greenback posted its biggest annual drop since 2003 in
2017, helping to lift gold to an annual increase of more than 13
percent. Bullion surged $55 an ounce in the last three weeks of
2017 alone.
    * Gold is highly sensitive to rising U.S. interest rates
because it increases the opportunity cost of holding
non-yielding bullion, while boosting the dollar, in which it is
    * Technical analysts warned that gold's rally is looking
overdone in the short-term.
    * Key factors for the bullion market this year will be how
quickly central banks normalize interest rates, how much further
the equities rally goes, the longer-term impact of U.S. tax
reforms, and when inflation will pick up, Mitsubishi analyst
Jonathan Butler said.
    * Spot palladium        jumped to a record high on Tuesday
at $1,096.50 on fears of short supplies after soaring 57 percent
in 2017. It was last up 0.2 percent at $1,094 an ounce early
    * Holdings of SPDR Gold Trust      , the world's largest
gold-backed exchange-traded fund, fell 0.14 percent to 836.32
tonnes on Tuesday from 837.50 tonnes on Friday.          
    * India's gold imports surged 67 percent in 2017 from the
previous year to 855 tonnes as jewellers replenished inventory
amid a rebound in retail demand, provisional data from precious
metals consultancy GFMS showed.             
    * Spot gold may break a resistance at $1,326 per ounce and
rise towards the next resistance at $1,380 in three months, as
suggested by its wave pattern and a Fibonacci ratio analysis,
according to Reuters technical analyst Wang Tao.             
    * Asian stocks struck a fresh decade high on Wednesday as
risk appetites were whetted by a bevy of upbeat manufacturing
surveys that confirmed a synchronised upturn in world growth was
well under way.             

 (Reporting by Nallur Sethuraman in Bengaluru; editing by
Richard Pullin)
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