BENGALURU, Jan 2 (Reuters): Gold began 2018 on a firm note on Tuesday after prices hit their highest in more than three months, supported by technical factors after breaking above $1,300 an ounce last week. Spot gold rose 0.2 per cent to $1,305.93 an ounce at 0251 GMT, having hit its highest since Sept. 26 at $1,307.63 earlier in the session.
US gold futures fell 0.1 per cent to $1,308 an ounce.
Gold has strengthened 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.
Key support for spot gold on Monday was set at $1,297 an ounce and resistance at $1,311 an ounce, according Reuters technical analyst Wang Tao.
Spot gold rose 13 per cent last year to mark its best annual performance since 2010. A wilting US dollar, political tensions and receding concern over the impact of US interest rate hikes fed the rally.
The greenback, in which gold is priced, had its worst performance since 2003 last year, damaged by tensions over North Korea, questions over Russian involvement in US President Donald Trump's election campaign, and persistently low US inflation.
"Gold has clearly benefited from lower US yields and a much weaker US dollar into the year-end and one also suspects, quite a bit of urgent short-covering in a thin market," said Jeffrey Halley, senior market analyst at OANDA.
Gold has risen more than $70 from nearly five-month lows hit in mid-December. Analysts and traders, though, remain cautious on how long the upward trend will hold.
