Forget Syria and India. The Fed remains no 1 threat to gold price

The gold price was treading water around the $1,360 level on Wednesday after a possible deal averting US airstrikes on Syria emerged and news that Indian gold imports fell by 70% in August from the month before hurt sentiment.

The gold price seemed to have turned a corner in August, briefly exiting a bear market as it fought back from near 3-year lows of $1,200 hit at the end of June.

But after failing to decisively clear the $1,400 level, the rally has been steadily losing steam this month.

Unfortunately for bullion bulls, apart from a dearth of safe haven buying and waning demand from a country that been the underpinning of the physical market for decades, there appears to be no lack of downside risks for the metal at the moment.

Central among the negative factors for the gold price in the short and medium term is an end to easy money in the US and a strengthening dollar.

Chairman Ben Bernanke is eager to throttle back asset purchases running at $85 billion a month and set to reach top $4 trillion by the end of the year under QE at the first signs of a solid economic recovery in the US.

Joni Teves, precious metals analyst at UBS, told CNBC on Wednesday that the risks for gold are skewed to the downside as short-covering purchases dry up and should the Fed decide to start tapering at its meeting starting a week from now.

Teves sees a move to $1,250 as not unlikely but should the Fed move more aggressively than the market is expecting (a $20 billion reduction) going below its June $1,200 low is not off the table.

Watch at CNBC.