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1st LD Writethru: Gold up on weaker U.S. dollar, short profit-taking

Xinhua, December 19, 2015 Adjust font size:

Gold futures on the COMEX division of the New York Mercantile Exchange rose Friday as the U.S. dollar fell and short traders took profits.

The most active gold contract for February delivery added 15.4 U.S. dollars, or 1.47 percent, to settle at 1,065.00 dollars per ounce.

For the week, gold futures settled lower with a 0.99 percent decline.

Gold was given support as the U.S. Dollar Index fell Friday. 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.

Traders betting against the precious metal took profits Friday, closing out positions and adding support to the precious metal. Many traders were in short positions when the Federal Reserve decided on its much-anticipated interest rate hike at its Federal Open Market Committee (FOMC) meeting from Tuesday to Wednesday. After the meeting ended Wednesday, the FOMC, the policy-setting arm of the Fed, announced the decision to increase its key interest rate in the same day.

Analysts believe the Fed aims to soak up some of the banks' 2.5 trillion U.S. dollars of excess reserves as the U.S. economy begins to recover. Banks become more willing to take risks in a bullish economy, and as a result could potentially release some of their excessive reserves, flooding the economy with cash and causing inflation.

Analysts believe that the long-term trend for gold remains strongly bearish as the Fed interest rate increase in December came despite expectations for a delay in the rate hike until 2016. 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. There has not been an increase in the Fed's interest rate since June 2006, before the beginning of the American financial crisis.

Silver for March delivery rose 39.3 cents, or 2.87 percent, to close at 14.096 dollars per ounce. Platinum for January delivery added 16.1 dollars, or 1.91 percent, to close at 860.80 dollars per ounce. Endit