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PRECIOUS-Gold hits near 4-week high as dollar retreats, demand surges

Published 05/01/2017, 02:24 am
© Reuters.  PRECIOUS-Gold hits near 4-week high as dollar retreats, demand surges
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* SPDR gold holdings down about 14 pct since U.S. elections

* Dollar index stays below 14-year highs

* Platinum, palladium edge to fresh multi-week highs (Updates prices, adds comment)

By Clara Denina

LONDON, Jan 4 (Reuters) - Gold touched a near-four week high on Wednesday as the dollar edged back from a 14-year peak and physical demand from major consumers China and India increased.

Spot gold XAU= climbed to its highest since Dec. 9 at $1,167.83 an ounce and was up 0.5 percent at $1,165.22 by 1514 GMT.

U.S. gold futures GCcv1 climbed $3.80 to $1,165.90 an ounce.

"The dollar index has consolidated and the big outflow from exchange-traded products (ETPs), which has been the biggest headwind for gold in the past few months, has stopped recently," said Julius Baer analyst Carsten Menke.

Holdings of the SPDR Gold Trust GLD , the world's largest gold-backed exchange-traded fund, dropped 1 percent to 813.87 tonnes on Tuesday. Holdings are down about 14 percent since the U.S. presidential election in November. GOL/ETF

"It is too early to tell if we are going to have a stabilisation in the holdings because the fundamental backdrop hasn't really changed and we are still in this positive post-Trump election environment where we are hoping for better growth in the States, a stronger dollar and higher interest rates," Menke said.

The dollar index .DXY retreated from its highest level since late 2002, a level reached after U.S. manufacturing data beat expectations on Tuesday. FRX/

A weaker dollar increases demand for commodities priced in the greenback by making them cheaper for holders of other currencies.

Gold's ascent in the past two weeks could come to a halt in the event of strong U.S. non-farm payrolls for December, due for release on Friday, as these would give a boost to the dollar and increase optimism about the world's largest economy, ABN Amro analyst Georgette Boele said. ECONUS

The Chinese New Year holiday in the first quarter of 2017 is likely to result in some physical restocking of metal there, analysts said.

"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 a source of wealth."

Gold imports to Turkey rose to 36.7 tonnes in December, their highest monthly level in just over two years, data from the Istanbul bourse showed on Wednesday. XAG= was up 1 percent at $16.41 an ounce, after hitting near three-week highs of $16.49 in the last session.

Platinum XPT= rose to four-week highs of $950.10 an ounce, extending a 4 percent increase in the previous session.

Palladium XPD= gained 4 percent to $736.90 an ounce, having climbed 4.5 percent on Tuesday. The metal is mostly used to clean up exhaust emissions from gasoline vehicles.

"It is possible that some market participants have been buying palladium in particular in anticipation of record-high vehicle sales in the U.S.," Commerzbank (DE:CBKG) said in a note.

U.S. auto sales figures for 2016 are due at 1830 GMT.

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