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Gold hit by taper

The price of gold has been hit by the US Federal Reserve’s decision to reduce the size of the bond-buying scheme.

Gold is trading at $1206, down 1% after last night’s decision by the Fed to lower the bond-buying scheme from $85 billion to $75 billion per month. The move has strengthened the US dollar and, since gold is traded in dollars, it has made the precious metal relatively more expensive.

Gold is deemed to be a quality investment so, when equities are deemed to be risky, traders often buy. As the Fed has seen it fit to reduce the size of the stimulus package, it is an indication that the US economy is starting to depend less on its central bank.

The yellow metal has already dipped below the $1200 mark this morning, but some short covering has pushed it a few dollars higher. We could therefore see it head towards $1200 again.

Spot gold chart

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