* All precious metals on course for yearly increases
* Palladium biggest price gainer for the year at 21 pct
* GRAPHIC-2016 metal returns tmsnrt.rs/2eqHKkL
By Clara Denina
LONDON, Dec 30 Gold hit a two-week high on
Friday on a weaker dollar and was set to close 2016 about 9
percent higher, snapping three years of declines.
Spot gold reached its highest since Dec. 14 at
$1,163.14 an ounce, before retreating to trade 0.1 percent lower
at $1,157.56 by 1427 GMT.
U.S. gold futures were unchanged at $1,158.60 an
In the first half of 2016, investors increased gold exposure
as the Federal Reserve showed caution on raising interest rates
due to concerns about global growth, while Britain's vote to
leave the European Union curbed appetite for risk and pushed the
metal to a two-year high in July.
But gold prices fell more than 8 percent in November, on
higher U.S. Treasury yields after Donald Trump's election win
led to speculation his commitment to infrastructure spending
would spur growth.
Bullion then hit a 10-month low on Dec. 15 as solid U.S.
economic data gave the Fed the confidence to raise rates for the
first time in a year. The central bank signalled three more
increases next year from the previous projection of two.
"In 2017, we could see more weakness in the gold price
because of the three projected rate increases by the Fed, which
would lead to a stronger dollar," said Peter Fertig, owner of
Quantitative Commodity Research.
"On the other hand, though, uncertainty about political
alliances between U.S. President-elect Trump and international
players could create some geopolitical fractures, which would be
positive for gold."
The precious metal is often seen as a hedge against
The dollar, which was down 0.5 percent against a
basket of six currencies, and U.S. Treasury yields will remain a
key driver for gold's movements, analysts said.
Returns from U.S. bonds are closely watched by the gold
market, given that the metal pays no interest.
Other precious metals were also set to end the year in
positive territory, with palladium the best performer,
up more than 21 percent so far in 2016. It was up 1 percent on
the day at $677.54 an ounce.
Platinum gained 0.5 percent to $901.80, heading for a
yearly rise of 1 percent, its first annual gain in four years.
The spread between platinum and palladium contracted to its
narrowest in nearly 15 years earlier this month at $141 an
ounce, as palladium, mostly used in autocatalysts, benefited
from higher car demand in China and the United States and
"A sharply widening deficit ... is likely to propel
palladium higher as scope for mine output remains limited and
industrial and auto demand firm," HSBC said in a note.
Silver, up 0.3 percent at $16.18, was on track to end
the year 17 percent higher.
(Additional reporting by Swati Verma in Bengaluru; Editing by