Gold drops on Fed tapering talk, US equities rally
Gold fell on Monday, surrendering some of the gains made in the previous session, on market expectations that the Federal Reserve may taper its monetary stimulus.
Also bearish for gold was Chinese government data showing the world's second-largest economy rose more than expected in August to decrease bullion's safe-haven appeal. U.S. stocks, measured by the S&P 500 index, rose 1 percent.
Speculation that the U.S. central bank is set to trim its $85 billion monthly mortgage bond-buying program, a key supporter of bullion prices, put added pressure on gold.
Analysts expect the Fed to start cutting its monthly stimulus by $10 billion to $20 billion with an announcement due at the end of a two-day policy meeting of the Fed Open Market Committee (FOMC) next Wednesday.
"Given the unwinding of bearish positions in gold, September's meeting is likely to place downside pressure on gold," said Suki Cooper, precious metals strategist at Barclays Capital.
Spot gold was down 0.3 percent at $1,386.36 an ounce. U.S. gold futures for December delivery settled up 20 cents an ounce at $1,386.70, with trading volume at 80,000 lots, less than half of its 30-day average, preliminary Reuters data showed.
On Friday, gold gained almost 2 percent after data showed slower-than-expected U.S. job growth in August, even as the jobless rate hit a 4-1/2 year low.
Gold's safe-haven status also weakened as U.S. President Barack Obama struggled to rally Congress behind U.S. military action in Syria, while Russia proposed on Monday Damascus should save itself by handing over chemical weapons.
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