Gold prices edged higher on Wednesday as subdued cash demand and investor short-covering helped offset a stronger US dollar. Spot gold was up 0.27 percent at $1,141.92 per ounce by 2:18 pm EST (1918 GMT), after hitting $1,148.98 on Tuesday, the strongest since December 14. The most active US gold futures for February delivery settled up $2.1, or 0.18 percent, at $1,140.90 per ounce.
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 Management. "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 US 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 December 15 as solid US economic data prompted the Federal Reserve to raise US interest rates for the first time in a year. The central bank signalled three more increases next year, up from the previous projection of two. Recent upbeat US 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.
"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. 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.
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