Gold eroded earlier gains as investors fear price hike may reduce demand. The metal plunged by $ 13 from the high of $1265.29 and fell by 0.14% today at 0709GMT.
Yesterday Gold prices reached to the level of $1259.96 on physical demand from China and uneven US economic results. But there was steep fall in early morning trading at East Asian markets. High prices do not attract physical buyers and at present market the prices are gaining mainly on physical demand. If prices rise above normal there is less possibility of small investors to buy more of precious metals.
On the other side Fed could cut bond buying pace further in the coming meeting on Jan 28-29. Mr. Ben S Bernanke, Fed Chairman, said in December news conference that Fed may cut stimulus by $10 billion in subsequent meetings if economy keeps strengthening. San Francisco Fed President John Williams said in an interview, Were likely to continue on a path of gradual, measured reductions in the pace of purchases, assuming the economy tracks as we expect it to. This month US economic indicators have not shown strong results that can back further stimulus cut. Mainly Non Farm Employment Change, one of the two important factors Fed is making stimulus decision on, disappointed economists in the beginning of this month.
Stimulus bets may keep Gold prices volatile but investors should remain careful in trading FOMC meet as there is high uncertainty for further tapering. Till the month end we are expecting Gold to remain under pressure.