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PRECIOUS-Gold inches up as physical demand offsets stronger dollar
January 4, 2017 / 3:59 AM / a year ago

PRECIOUS-Gold inches up as physical demand offsets stronger dollar

* SPDR gold holdings down about 14 pct since U.S. elections
    * Dollar index stays near 14-year highs
    * Platinum, palladium down from near 3-week peaks hit
Tuesday

 (Recasts, adds comment)
    By Swati Verma
    BENGALURU, Jan 4 (Reuters) - Gold prices edged up on
Wednesday as buoyant physical demand from major consumers China
and India offset the impact of a stronger U.S. dollar.
    Spot gold was up 0.3 percent at $1,162.68 an ounce by
0639 GMT. Prices touched their highest in three weeks on Tuesday
at $1,163.52.
     U.S. gold futures climbed 0.1 percent to $1,163.20
per ounce.
    "Physical demand from China and India is quite strong at the
moment," said NAB analyst Vyanne Lai.
    "With the upcoming Chinese New Year there is a seasonally
strong period for jewellery and in India the shortage of cash
has prompted some safe-haven buying from Indian consumers as
source of wealth."
    She added that policies of President-elect Donald Trump in
the United States had been stoking appetite for gold as a hedge
against inflation, despite the strong U.S. dollar.
    U.S. factory activity sped to a two-year high in December
amid a surge in new orders, while manufacturing in the euro zone
grew at its fastest pace in five years. 
    The dollar index, which measures the greenback
against a basket of currencies, was at 103.25 after climbing to
103.82 the previous day, its strongest since December 2002.
 
    A firm dollar curbs demand for commodities priced in the
greenback by making them more expensive for holders of other
currencies.
    Holdings of the SPDR Gold Trust, the world's largest
gold-backed exchange-traded fund, dropped 1.01 percent to 813.87
tonnes on Tuesday. Holdings are down about 14 percent since the
U.S. presidential election in November. 
    "We expect ... appetite to remain cautious at least for the
time being," said Barnabas Gan, an analyst at OCBC Bank in
Singapore.
    NAB's Lai said that if bond yields and stock prices rose,
then demand for gold would likely diminish over the year.
    "If the (U.S.) rate hike frequency picks up we are likely to
see bond prices rise further, that would in turn encourage
investors to switch out of ETFs into alternative assets."
    Meanwhile, silver was up 0.6 percent at $16.37 an
ounce, after hitting near three-week highs in the last session. 
    Platinum dipped 0.5 percent to $932.40, having risen
over 4 percent the day before.
    Palladium gained 0.6 percent to $713.30 an ounce. It
climbed over 4.5 percent on Tuesday.

 (Reporting by Swati Verma in Bengaluru; Editing by Joseph
Radford and Chrsitian Schmollinger)

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