Gold prices extend gains in technical rebound

By Swati Verma

BENGALURU (Reuters) - Gold prices rose on Wednesday, extending gains after it hit a near two-week high in the previous session, on a technically-driven rebound in thin volume amid a slightly weaker dollar.

Spot gold was up half a percent at $1,143.98 an ounce by 0636 GMT. Gold hit its strongest since Dec. 14 on Tuesday at $1,148.98.

U.S. gold futures also rose 0.5 percent at $1,144.50 per ounce.

"Currently we do not see many strong fundamental reasons to push gold prices further down. However, after the Fed conference in December, there should be some technical rebound in gold prices," said Jiang Shu, chief analyst, Shandong Gold Group.

"Since there are a few trading days left until the end of this year we think that the rebound will not be very strong."

Spot gold may bounce to $1,210 per ounce before falling towards its Dec. 15 low of $1,122.35 in the next three months, according to Reuters technical analyst Wang Tao.

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.

"Currently there are very strong expectations of more rate hikes next year," said Shu, adding that declining gold prices have had a negative impact on the bullish sentiment in physical gold prices.

The Federal Reserve raised U.S. interest rates earlier this month for the first time in a year and signalled three more increases next year from the previous projection of two.

U.S. consumer confidence shot to its highest in more than 15 years in December as Americans saw more strength ahead in business conditions, stock prices and the job market following the election of Donald Trump as president in November.

The upbeat data helped underscore expectations that the U.S. central bank would raise interest rates at a faster pace next year, which lowers demand for non-yielding assets such as bullion, while boosting the dollar, in which it is priced.

The dollar index, which measures the greenback against a basket of currencies, was down 0.1 percent at 102.90.

"We don't think much will be going on in the markets for the balance of the week. Sharp moves in either direction must be weighed against the fact that liquidity remains fairly light," INTL FCStone analyst Edward Meir said in a note.

Silver was down 0.3 percent at $15.90 an ounce. The metal rose nearly 1.5 percent on Tuesday.

Platinum was up 0.5 percent at $904.70 and palladium rose 0.5 percent at $674.47, after rising over 2 percent in the previous session.

(Reporting by Swati Verma in Bengaluru; Editing by Christian Schmollinger and Biju Dwarakanath)