Gold Retreats As Bulls Take Shelter Before FOMC Decision

Gold traded lower early Monday amid fears the Federal Reserve will announce a possible early tapering of its monetary stimulus program at its monetary policy meeting later this week.

The bullion market kicked off its weekly trade to the north, as traders anxiously anticipated the FOMC’s Dec 17-18 policy meeting due this week amid strong bets that the US central bank will introduce an early twist to its $85 billion monthly bond purchases. So Will the Fed play Santa this year or just stand pat on its stimulus program into 2014?

Spot gold was down 0.36% at $1,234.23 an ounce as of 01:52 ET, compared with Friday’ close at $1,238.69. The day’s range is far between $1,233.57 and $1,239.52.

The outcome of the Fed's policy meeting will be the cherry on the top of the year, especially after gold lost more than 25% of its value since the year began, as investors lost appetite for bullions` safe-haven appeal in favor of much riskier assets.

Therefore, the bullion market will be will bull-eye the central bank's next move as Fed officials gather for the last time this year for a two-day policy meeting that ends Wednesday.

Gold is strongly poised to mark its first annual slide in 13 years as bullion junkies stick to the sidelines ahead of the FOMC's policy decision which will set the upcoming tone for the precious metals market.

However, few participants bet the Fed won’t move until next year as the economic recovery needs to be sustained into 2014, especially after the improvement in the trend rate of payrolls growth to the +200 thousand level.

Two weeks ago, the US labor department said the economy added 203 thousand Americans to the non-farm payrolls in November, beating analysts` median estimate calling for an increase of only 180 thousand. The unemployment rate fell to a five-year low of 7% last month.

The latest jobs data roughly come in line with the Fed`s jobs outlook, so we don't expect much of radical change in its stimulus outlook, at least until early next year if economy proves strong to sustain recent signs of recovery.

The downside trade is expected to extend this week ahead of the Fed`s policy meeting. Technically, gold prices remain within bearish trend, below the key resistance area among $1254.00-1268.00, thus we remain bearish for this week.