Investors will be hoping for the start of the traditional "Santa rally" when trading resumes on the Australian share market following the Christmas break.
The local market is expected to get a boost when trading starts on Wednesday after the Dow Jones Industrial Average ended last Friday by recording its seventh consecutive week of gains.
![Shares are likely to see their traditional Santa Claus rally over the Christmas/New Year period](/web/20161227143442im_/http://www.smh.com.au/content/dam/images/g/t/g/8/g/8/image.related.articleLeadwide.620x349.gtie2j.png/1482811841378.jpg)
Trading volumes, however, are expected to be thin given many investors will still be enjoying their festive break.
The benchmark S&P;/ASX 200 index dipped 0.3 per cent to close at 5,627.9 points in a shortened trading session on Friday, but still managed to post a gain of 1.7 per cent for the week.
Local investors sold shares in miners, retailers and financials ahead of the Christmas holiday break, bringing an end to a four-day winning streak.
Despite Friday's dip, the S&P;/ASX 200 is on track to record a six per cent rise for 2016, with only three trading sessions left for 2016.
AMP Capital chief economist Shane Oliver expects the local share market will post solid returns of about nine per cent during 2017, aided by the recent rebound in bulk commodity prices.
"Shares are likely to see their traditional Santa Claus rally over the Christmas/New Year period," he said.
"However, at some point in the first quarter a correction or consolidation in shares and the US dollar is likely as sentiment has become very stretched on the upside in relation to both and a bout of nervousness will no doubt kick in regarding what (president-elect) Donald Trump will do, US-China tensions and the negative impact of the rise in the US dollar."
With no local economic news due on Wednesday and few company announcements expected, investors will be keeping an eye on the listing of Perth-based real estate and financial services group Ausnet Financial Services.
The company was recently the subject of a reverse takeover by listed gold, silver and base metals exploration company Namibian Copper.
Separately, gold prices rose slightly on Tuesday but overseas trading was thin as investors looked for directions after the long Christmas weekend, even as a firm dollar capped gains.
Spot gold was up 0.3 per cent at $1,136.80 an ounce by 0310 GMT, after earlier edging down to $1,131.35.
US gold futures rose 0.4 per cent to $1,138.20 per ounce.
The US dollar rose against the yen and euro as some investors emerged out of the holiday lull to hunt for bargains as the market entered the last trading stretch of the year.
"People are waiting until Trump becomes the US President and until we see his real policies or what he will do when he takes the office," said Yuichi Ikemizu, head of commodity trading at Standard Bank in Tokyo.
"People are just watching the other markets like dollar and stock markets and kind of expecting the stock market and financial market to be good under Trump government. In that case, people don't need gold and instead invest in stocks."
The US currency had climbed to a 10-month high of 118.660 yen mid-month on expectations of stronger growth after U.S President-elect Donald Trump takes office in January.
A firm dollar curbs demand for commodities priced in the greenback by making them more expensive for holders of other currencies.
Asian stocks were mixed on Tuesday, in thin trade and with little to guide them as most major markets were closed on Monday for Christmas holidays.
Gold demand in India remained subdued last week despite a sharp fall in prices to over ten-and-half month lows as a severe cash crunch and holidays kept buyers away from the market, while premiums in China fell from near three year highs touched in the prior week.
AAP, with Reuters
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