Gold lost ground against the American dollar and closed the day at $1218.05 an ounce after the U.S. Federal Reserve decided to trim the pace of its monthly asset purchases by $10 billion to $75 billion. The Federal Open Market Committee announced that “In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions, the Committee decided to modestly reduce the pace of its asset purchases.
Beginning in January, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $40 billion per month rather than $45 billion per month” at the conclusion of a two-day meeting yesterday. Ultimately, this decision is supportive for the American dollar but since we are approaching to a critical support at the 1213 level, which has been holding the market lately, I would advise caution.
Looking at the daily charts from a purely technical point of view, the odds favor a bit of a bounce around these levels. However, the broader directional bias remains weighted to the downside and the bears will use this opportunity to increase selling pressure and drag prices below the 1213 level. If the pair successfully drops below 1213, it will resume the bearish sentiment and test the 1200 support level. A successful close below 1200 means 1180 will be the next target. To the upside, first challenge will be waiting the bulls at 1225. Beyond that, there will be other hurdles in the way such as 1237 and 1252.
