Following December rally, Gold hits highest since September

NEW YORK, U.S. - On Tuesday, Gold hit its highest since late September, extending a year-end rally.

In the last three weeks of 2017, the metal rose 4.4 percent, as a further retreat in the dollar drove prices above $1,310 an ounce.

Meanwhile, on Tuesday, Palladium prices bounced to a new 17-year high, within $5 of their all-time peak.

Price bounced as tightening emissions controls and a swing away from diesel cars in Europe fuelled fears of a shortage of the metal after years of market deficit.

At 1505 GMT, spot gold was up 0.8 percent at $1,312.52 an ounce, while U.S. gold futures for February delivery were up $4.90 an ounce at $1,314.20.

Last year, after the dollar posted its biggest annual drop since 2003, helped to lift gold by more than 13 percent in 2017. 

In the last three weeks of the year alone, the metal surged $55 an ounce.

Technical analysts have warned that gold’s rally is now looking overstretched.

Earlier on Tuesday, spot prices rose to a peak of $1,313.88 an ounce.

Jonathan Butler, Mitsubishi analyst said, “Gold starts 2018 at the highest level since September, and the highest January opening since 2013. It is only the fourth time ever that gold has opened the year above $1,300.”

Butler said, “The key questions for gold in 2018 will be how quickly developed economies can normalize interest rates after more than a decade of monetary largesse; how much further global equity market rallies can extend; what the longer-term impact of the Trump tax reforms will be on corporates and on U.S. government debt levels; and when inflation will finally start to pick up.”

He added that dollar weakness could support gold in the near term. 

On Tuesday, the U.S. currency slipped to a four-month low against the euro on optimism over a brightening economic picture in the euro zone.

Stocks, however, had a groggy start to the year.

Over the past two weeks, Jeffrey Halley, a senior market analyst at OANDA, pointed out that gold has benefited from technical strength, yet the bulk of its rally came during the holiday period with much lower-than-normal average daily volumes.

Halley added that the metal is looking overbought.

Meanwhile, spot silver was up 1.1 percent at $17.13. 

Spot platinum was 1.2 percent higher at $937.

Palladium was up 2.3 percent at $1,084.95 after reaching $1,090.60 earlier, which was its highest since January 2001, when it peaked at a record $1,095. 

Butler meanwhile pointed out, “The fundamentals are strong, it’s true... but this has the mark of a spec squeeze especially given today’s thin trading, right at the start of the year with many market participants still enjoying holidays.”