Gold Holds Off 5-Month Low As Tapering Fears Mount

Gold steadied near lowest level since July early Tuesday amid renewed concerns of monetary-stimulus tapering by the Federal Reserve following strong signals from the US manufacturing sector.

The precious metal dropped more than 2% yesterday as US manufacturing sector grew faster-than-anticipated in November, with both the PMI manufacturing index and ISM manufacturing index pointing to very solid acceleration for the sector which appears to betting a lift from increasing strength in the auto sector. Meanwhile, bullion junkies continue to weigh whether signs of a strengthening economy will be enough for the Fed to reduce stimulus.

Spot Gold reversed morning slide only rising slightly to $1,224.40 an ounce at 02:23 EST today, compared with yesterday's close at $1,219.83. The day's range is so far between $1,218.61 and $1,225.40.

A robust dollar also weighed on bullion sentiment this morning in the wake of shiny economic data from the world’s largest economy, and before a private survey tomorrow probably show US private payrolls increased by the most since June.

The US Dollar Index, which tracks the performance of the greenback against a six-currency basket, rose to a multi-month high yesterday, but now the USIDX was little changed today around 80.86 as traders await fresh signs of recovery.

The US economic digest goes on with ADP employment report likely to show US payrolls increased 170 thousand jobs in November, the strongest figure in five months. Separately, the non-manufacturing ISM tomorrow may signal continued expansion in the US services sector.

Friday's US employment data is the biggest market-moving indicator this week, while analysts predict the US added fewer non-farm payrolls in November, compared with October's surprising figure that fueled concerns that Fed would start tapering its monthly $85 billion quantitative easing soon, perhaps by the end of the end of the year.