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2018.01.0201:48:00UTC+00Gold Prices Reach Over 3-Month Peak on Technical Factors

Gold started 2018 on a strong note on Tuesday after prices reach their highest in over three months, buoyed by technical factors after breaking above $1,300 per ounce the previous week.

Spot gold increased 0.2 percent to $1,305.93 per ounce, having notched its highest since Sept. 26 at $1,307.63 earlier in the session.

U.S. gold futures dropped 0.1 percent to $1,308 per ounce.

The yellow metal has firmed technically after closing above 200-day and 100-day moving averages over the past two weeks, also breaching key psychological resistance at $1,300 on Friday.

Spot gold increased 13 percent in 2017 to record its best annual performance since 2010. The weakening of the U.S. dollar, political tensions and diminishing concern over the impact of U.S. interest rate hikes supported the rally.

Gold has gained more than $70 from almost five-month lows notched in mid-December.

Analysts and traders remain cautious on how long the upward trend will hold.

The 14-day relative strength index (RSI) for spot gold hit 71.63 on Tuesday, it highest since September 2017. An RSI above 70 indicates a commodity is overbought.

Recent data from the U.S. Commodity Futures Trading Commission gave a slight contribution to the bullishness to gold, showing that hedge funds and money managers increased their net long positions in COMEX gold for the second straight week in the week to Dec. 26.

The rally in gold prices and the year-end holiday mood reduced physical demand across Asia last week.

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