Gold prices extend rally as palladium touches record high

[NEW YORK] Gold extended its rally into the new year on Tuesday, touching late September highs on a softer US dollar, while spot palladium jumped to a record on fears of short supplies after soaring 57 per cent in 2017.

Spot gold was up one per cent at US$1,315.11 per ounce at 2.36pm EST (1936 GMT) after hitting US$1,315.46, the highest since Sept 20, 2017. Gold has risen each trading session since Dec 15.

US gold futures for February delivery settled up US$6.80, or 0.52 per cent, at US$1,316.10 per ounce.

The US dollar index fell to a more than three-month low on expectations of a slower pace of interest rate hikes by the US Federal Reserve.

The greenback posted its biggest annual drop since 2003 in 2017, helping to lift gold to an annual increase of more than 13 per cent. Bullion surged US$55 an ounce in the last three weeks of 2017 alone.

Global markets received a boost on Tuesday from gains in US equities and surprisingly upbeat Chinese manufacturing data.

"(Gold's) rally has been part and parcel with the weaker dollar," said Rob Haworth, senior investment strategist at US Bank Wealth Management in Seattle.

"The tax plan seems to have changed the tenor and trend of the market," he added, referring to the Republican tax overhaul expected to balloon the US budget deficit.

Technical analysts warned that gold's rally is looking overdone.

Key factors for the bullion market this year will be how quickly central banks normalize interest rates, how much further the equities rally goes, the longer-term impact of US tax reforms, and when inflation will pick up, Mitsubishi analyst Jonathan Butler said.

Gold is highly sensitive to rising US interest rates because it increases the opportunity cost of holding non-yielding bullion, while boosting the US dollar, in which it is priced.

Palladium jumped 3.12 per cent to US$1,094.10 per ounce.

Prices rose to US$1,096.50, surpassing a previous record set in January 2001. Palladium was the stand-out performer among major precious metals last year, jumping 57 per cent to hit a series of multiyear highs.

"Palladium continues to rally on real demand and supply tightness," Miguel Perez-Santalla, vice-president of Heraeus Metal Management in New York, said in a market note.

Among other precious metals, spot silver was up 1.4 per cent at US$17.184. Platinum was 1.7 per cent higher at US$941.50 per ounce.

REUTERS