Gold ends higher at $1,241; Fed taper fears grip traders

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Gold futures settled higher on Tuesday, but spot gold dropped as encouraging U.S. housing activities stirred fears the Federal Reserve will soon decide to reduce its bond-buying stimulus program.

Spot gold was last down 0.8 percent to $1,242 an ounce having earlier hit $1,256.49 in early trading, its highest since Nov. 20. for December delivery settled $2.00 higher at $1,241.40 an ounce.

Bullion came under pressure after data showed permits for future U.S. home construction hit a near 5-1/2 year-high in October, and a report showed the S&P/Case Shiller composite index of home prices in 20 metropolitan areas jumped 13.3 percent in September.

Chart: Precious Metals

The reports were the latest signs of strength in the economy, despite headwinds from rising mortgage rates and last month's partial government shutdown.

"The positive building permits and Case Shiller numbers are signalling the possibility that tapering is back on the table, weighing down on the gold,'' said Thomas Capalbo, a precious metals broker at New York futures brokerage Newedge.

—By Reuters

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