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Gold soars toward largest annual gain since 2010 on US dollar boost

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Gold extended its rally to a three-month high on Friday, leaping toward its biggest one-year rise in seven years as a wilting US dollar, political tensions and receding concerns over the impact of US interest rate hikes fed into its rally.

[NEW YORK] Gold extended its rally to a three-month high on Friday, leaping toward its biggest one-year rise in seven years as a wilting US dollar, political tensions and receding concerns over the impact of US interest rate hikes fed into its rally.

Gold's gains coincide with the greenback, in which gold is priced, sliding toward its worst year since 2003, damaged by tensions over North Korea, the Russian scandal surrounding US President Donald Trump's election campaign, and persistently low US inflation.

The dollar index touched three-month lows on Friday, lifting bullion to its highest level since late September at US$1,307.60 an ounce before paring gains.

Strong charts, the weaker US dollar and expectations of bullish fundamental factors ahead have bolstered gold prices in year-end trade, said David Meger, director of metals trading for High Ridge Futures in Chicago.

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Spot gold prices were up 0.67 per cent at US$1,303.37 per ounce by 2:05pm EST (1905 GMT), poised to finish 2017 up 13 per cent. Benchmark US gold futures settled up US$12.1, or 0.93 per cent, at US$1,309.30 per ounce, finishing the year 12 per cent higher.

"Going back to the last Fed meeting with its slightly more dovish tone, commodities markets have gotten a bit of a green light," Mr Meger said, referring to indications this month that the US central bank will keep its rate outlook unchanged in the coming year.

"This recent bout of weakness in the dollar certainly is fostering a commodities rally and we've seen a light downturn in equities as well." The metal will be vulnerable next year to a rebound in the currency, as well as any gains in yields, ABN Amro analyst Georgette Boele said. The opportunity cost of holding non-interest bearing bullion increases when yields rise elsewhere.

Gold's chart signals look positive after it broke above its 100-day moving average this week at US$1,295 an ounce, ScotiaMocatta's technical team said in a note, pointing to a target of October's high at US$1,306.

Among precious metals, palladium posted the strongest rise this year, climbing 57 per cent as concerns grew over availability after years of deficit.

Palladium eased 0.31 per cent to US$1,062.05 an ounce, having hit its highest level since February 2001 at US$1,072 in the previous session. It has held in a historically unusual premium to platinum this quarter.

Silver was up 0.51 per cent at US$16.926, paring gains from a one-month high of US$17.111. Platinum was up 0.11 per cent at US$924 after touching a four-week high of US$936.20. This year, the two metals have risen by 6 per cent and 3 per cent, respectively.

REUTERS