December 29, 2017 / 11:08 AM / 19 days ago

PRECIOUS-Gold rises towards $1,300/oz, heading for best year since 2010

    * Spot gold up more than 12 pct this year
    * Weaker dollar, political tensions lift gold
    * Palladium best precious performer in 2017, up 57 pct
    * GRAPHIC-2017 asset returns: tmsnrt.rs/2jvdmXl

 (Updates prices)
    By Jan Harvey
    LONDON, Dec 29 (Reuters) - Gold hit a one-month high on
Friday and stayed on track for its biggest annual rise since
2010 as a wilting dollar, political tensions and receding
concerns over the impact of U.S. interest rate hikes fed into
its rally.
    The dollar, in which gold is priced, is sliding towards its
worst year since 2003, damaged by tensions over North Korea, the
Russian scandal surrounding U.S. President Donald Trump's
election campaign, and persistently low U.S. inflation.        
    The dollar's drop to three-month lows versus a basket of
currencies on Friday lifted gold to its highest since late
November, within a few dollars of $1,300 an ounce. 
    Spot gold        was up 0.2 percent at $1,296.90 an ounce at
1240 GMT, off a peak of $1,297.65. U.S. gold futures        for
February delivery were up $1.80 an ounce at $1,299.00.
    "In the last couple of weeks, trade has been relatively
thin, yields have been under pressure and the dollar as well, so
gold has profited from that," ABN Amro analyst Georgette Boele
said. "If you look over the year, dollar weakness has been the
main theme."
    Gold will be vulnerable next year to a rebound in the
currency, as well as any gains in yields, she said. The
opportunity cost of holding non-interest bearing bullion
increases when yields rise elsewhere.
    The impact of three U.S. interest rate hikes this year was
offset by the dollar's weakness, Boele said. "The dollar is the
most important driver, and then real yields. The Fed is
increasing rates, but the dollar's not profiting."
    Gold, which is also on course for its best month since
August, has also benefited of late from technically driven
momentum, analysts said.
    After breaking above its 100-day moving average this week at
$1,295 an ounce, new resistance comes in at the $1,300 level,
ScotiaMocatta's technical team said in a note. "Momentum
indicators are bullish as gold appears poised to target the
October high (of) $1,306," it said.
    Among precious metals, palladium has seen the strongest rise
this year, climbing more than 57 percent as concerns grew over
availability after years of market deficit.
    Spot palladium        was down 0.3 percent at $1,062 an
ounce, having hit its highest since February 2001 at $1,072 in
the previous session. It has held in a historically unusual
premium to platinum through the fourth quarter.
    Spot silver        was up 0.2 percent at $16.87, while
platinum        was 0.4 percent higher at $926.49. This year the
two metals have risen 5.9 percent and 3 percent respectively. 

    
 (Additional reporting by Nallur Sethuraman in BENGALURU;
editing by Mark Heinrich)
  
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