December 29, 2017 / 2:49 PM / 25 days ago

PRECIOUS-Gold breaks above $1,300/oz on way to best year since 2010

    * Spot gold up more than 13 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

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    By Jan Harvey
    LONDON, Dec 29 (Reuters) - Gold hit its highest in 2-1/2
months on Friday and remained 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 mid
October at $1,303.90 an ounce. 
    At 1430 GMT spot gold        was at $1,302.72 an ounce, up
0.2 percent, while U.S. gold futures        for February
delivery were up $7.80 an ounce at $1,305.00.
    "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.
    ScotiaMocatta's technical team said in a note that chart
signals for the metal look positive after it broke above its
100-day moving average this week at $1,295 an ounce. "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 56 percent as concerns grew over
availability after years of market deficit.
    Spot palladium        was down 0.5 percent at $1,059.65 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 0.7 percent at $16.97, while
platinum        was 1.2 percent higher at $933.90. This year the
two metals have risen by 6.5 percent and 3.8 percent
respectively. 

    
 (Additional reporting by Nallur Sethuraman in Bengaluru;
editing by Mark Heinrich and Jason Neely)
  
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