November 22, 2016 / 3:45 AM / in 2 years

PRECIOUS-Gold rises for second day on Asia physical buying, dollar drop

* Spot gold may test resistance at $1,222/oz -technicals
    * Dollar index off 13-1/2-year high touched last week
    * Palladium hits strongest in over 3 months
    * SPDR Gold holdings drop 0.7 percent on Monday

 (Adds comment, detail; updates prices)
    By Apeksha Nair
    Nov 22 (Reuters) - Gold prices climbed for a second day on
Tuesday, buoyed by an easing U.S. dollar and physical buying in
Asia.
    Spot gold was up 0.3 percent at $1,217.35 an ounce by
0628 GMT. The previous day, it advanced 0.4 percent to snap
three sessions of losses.
    U.S. gold futures were up 0.64 percent at $1,217.50
per ounce, after earlier rising as high as $1,220.90.   
    "Gold prices have factored in the December (U.S. rate hike)
move. Now it is a matter of bargain-hunting," said Spencer
Campbell, general manager with Kaloti Precious Metals in
Singapore.
    "We are seeing a lot of activity in Southeast Asia. The drop
in prices and inverse pricing against the local currency are
driving the buying."
    Gold has fallen more than $120 an ounce from its post-U.S.
election peak on Nov. 9 as U.S. Treasury yields posted their
biggest two-week rise in more than five years and the dollar
shot higher.
    But the U.S. dollar weakened on Tuesday, supporting bullion.
    The dollar index, which measures the greenback
against a basket of major currencies, slipped 0.15 percent to
100.910, falling further after snapping a 10-day rising streak
on Monday.         
    "Gold kept its head above water, with technical-based buying
supporting the market. However, with the market increasing bets
on a December rate hike in the U.S., this buying is unlikely to
persist in the short term," ANZ analysts said in a note."
    Gold is highly-sensitive to rising interest rates which lift
the opportunity cost of holding non-yielding assets such as
bullion, while boosting the dollar, in which it is priced.
    "We still expect gold to struggle against a host of bearish
elements that remain arrayed against it, including a stronger
dollar, soaring equity markets and the prospect of further rate
hikes that could follow the widely-expected increase slated for
next month," INTL FCStone analyst Edward Meir said in a note.
    The world's largest gold-backed exchange-traded fund, SPDR
Gold Trust, said its holdings fell 0.71 percent to 908.77
tonnes on Monday. Holdings have fallen 3.6 percent so far this
month.  
    Goldman Sachs on Monday lowered its three- and six-month
gold price forecasts to $1,200 per troy ounce and said downside
risks remain from potential physical ETF liquidation.
 
    Spot gold may test resistance at $1,222 per ounce, a
break above which could lead to a gain to $1,235, according to
Reuters technicals analyst Wang Tao. 
    Silver rose 1.3 percent at $16.77 an ounce and
platinum was 1.3 percent higher at $947.00.
    Palladium was up 0.93 percent at $734.90, after
earlier touching its strongest since Aug. 10 at $736.20.

 (Reporting by Apeksha Nair in Bengaluru; additional reporting
by Nallur Sethuraman; Editing by Richard Pullin and Christian
Schmollinger)
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