LONDON: Gold hit its highest since late Septem­ber on Tuesday, extending a year-end rally that saw the metal rise 4.4 per cent in the last three weeks of 2017, as a further retreat in the dollar drove prices above $1,310 an ounce.

The weaker dollar, which posted its biggest annual drop since 2003 last year, helped to lift gold by more than 13pc in 2017. The metal surged $55 an ounce in the last three weeks of the year alone. While technical analysts warn that gold’s rally is now looking overstretched, spot prices rose to a peak of $1,313.88 an ounce earlier on Tuesday.

Spot gold was up 0.8pc at $1,313.43 an ounce at 1335 GMT, while US gold futures for February delivery were up $6.00 an ounce at $1,315.30.

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

“The key questions for gold in 2018 will be how quickly developed economies can normalise 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 US government debt levels; and when inflation will finally start to pick up.”

Further dollar weakness could support gold in the near term, he said. The US currency slipped to a four-month low against the euro on Tuesday on optimism over a brightening economic picture in the eurozone.

Gold benefited from technical strength after closing above 200-day and 100-day moving averages over the past two weeks and breaching key psychological resistance at $1,300 on Friday, analysts and traders said.

Spot gold’s 14-day relative strength index (RSI) touched 72.54 on Tuesday, it highest since September 2017. An RSI above 70 indicates a commodity is overbought. “The RSI has been an excellent indicator of short-term price corrections in 2017,” Halley said.

Published in Dawn, January 3rd, 2018