December 28, 2016 / 11:32 AM / 2 years ago

PRECIOUS-Gold edges up on subdued physical demand, short-covering

* Dollar rises against a basket of currencies
    * SPDR gold holdings down 13 pct since U.S. elections
    * Spot prices poised to end 2016 higher

 (Updates prices; adds market comment, NEW YORK dateline,
    By Chris Prentice and Clara Denina 
    NEW YORK/LONDON, Dec 28 (Reuters) - Gold prices edged higher
on Wednesday as subdued cash demand and investor short-covering
helped offset a stronger U.S. dollar. 
    Spot gold was up 0.27 percent at $1,141.92 per ounce
by 2:18 p.m. EST (1918 GMT), after hitting $1,148.98 on Tuesday,
the strongest since Dec. 14.
    The most active U.S. gold futures for February
delivery settled up $2.1, or 0.18 percent, at $1,140.90 per
    Traders were covering short positions in options-related
dealings and year-end demand from China and Russia buoyed
prices, said George Gero, managing director at RBC Wealth
    "Gold is holding up despite lots of bears in the woods for
lots of good reasons," he said.
    Spot prices are poised to finish the year up about 8 percent
despite an 8 percent drop in November, as U.S. Treasury yields
rose after Donald Trump's election led to speculation his
commitment to infrastructure spending would spur growth.
    Gold hit a 10-month low on Dec. 15 as solid U.S. economic
data prompted the Federal Reserve to raise U.S. interest rates
for the first time in a year. The central bank signalled three
more increases next year, up from the previous projection of
    Recent upbeat U.S. data has helped underscore expectations
the Fed will raise interest rates more quickly next year, which
would lower demand for non-yielding assets such as bullion,
while boosting the dollar in which it is priced. 
    The dollar index edged higher against a basket of six
main currencies on Wednesday. 
    "In the short term, we are focused towards support at $1,100
and a break of this will be very bearish for the metal. As for
the upside, we really need to break the level of $1,170 and
$1,200," said Naeem Aslam, chief market analyst at ThinkMarkets.
    Reflecting bearish investor sentiment, assets in the SPDR
Gold Trust, the world's largest gold-backed
exchange-traded fund, fell 0.14 percent to 823.36 tonnes on
Tuesday. Holdings are down about 13 percent since the U.S.
presidential elections. 
    The Shanghai Gold Exchange, the world's biggest physical
bullion exchange, said on Wednesday it would curb the amount of
gold investors can trade at one time, a move analysts said would
limit institutional investors' influence on prices. 
    Spot silver was up 0.31 percent at $16 an ounce. The
metal rose about 1.5 percent on Tuesday.
    Platinum platinum was down 0.13 percent at $899.30
per ounce and palladium fell 0.48 percent to $667.80,
after rising over 2 percent in the previous session.

 (Additional reporting by Swati Verma in Bengaluru; Editing by
Alexandra Hudson and Richard Chang)
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