1st LD Writethru: Gold up on weaker U.S. dollar

Gold futures on the COMEX division of the New York Mercantile Exchange rose Wednesday as the U.S. dollar weakened.

The most active gold contract for February delivery rose 1.2 U.S. dollars, or 0.11 percent, to settle at 1,076.50 dollars per ounce.

Gold was given support as the U.S. Dollar Index fell by 1.03 percent to 97.39 as of 1800 GMT. The index is a measure of the dollar against a basket of major currencies. Gold and the dollar typically move in opposite directions, which means if the dollar goes up, gold futures will fall as gold, measured by the dollar, becomes more expensive for investors holding other currencies.

The feature of the day was low volume and no news, as there were no major economic reports released. The market is still in the process of digesting the expected rate hike at the December Federal Open Market Committee (FOMC) meeting. The current implied probability of the December rate hike, however, is 85 percent, according to the CMEGroup's Fedwatch tool.

An increase in the Fed's interest rate drives investors away from gold and towards assets with a return, as the precious metal bears no interest. Expectations were originally for a delay in the rate hike until 2016 but the FOMC meeting in late October confirmed that the Fed wants to raise rates before the end of 2015. There has not been an increase in the Fed's interest rate since June 2006, before the beginning of the American financial crisis.

Analysts believe that the market has almost fully factored in the expected December rate hike, and that the market is now unsure of when the next rate hike will occur.

Silver for March delivery added 7.3 cents, or 0.52 percent, to close at 14.189 dollars per ounce. Platinum for January delivery rose 19.3 dollars, or 2.28 percent, to close at 865.80 dollars per ounce. Endit