Gold price: No taper could bring 'relief rally'

The gold price enjoyed another double digit jump on Monday, building on the strong end to last week's trading ahead of a crucial decision by the US Federal Reserve on winding down its US monetary stimulus program.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at $1,245.20 an ounce in early afternoon trade, down from highs above $1,250 hit during lunchtime dealings.

The Federal Open Market Committee could announce a reduction in purchases under its quantitative easing program that has pumped $4 trillion of easy money into the US economy at its two-day meeting ending on Wednesday.

The Fed has been reviewing QE and is eager to throttle back asset purchases running at $85 billion a month at the first signs of a solid economic recovery in the US; something the data have been supporting recently.

But forecasts of the Fed's timetable and scope to scale back the program are all over the place with a Reuters poll showing only 12 out of 60 economists predict a taper this week and a small he majority believing cuts will only come in March.

CNBC quotes Mark O'Byrne, Founder and Executive Director of Dublin-based bullion dealer GoldCore as saying: "If the Fed defers a taper, we should see gold bounce from oversold levels which could help it test $1,300 again," but on the flipside with a taper, which Goldcore does not believe will happen this week, gold "will likely fall to test strong support at $1,200".

Others do not see much upside for the gold price. The Economic Times quotes Joni Teves, precious metals analyst at Swiss investment bank UBS, who says the resistance seen last the week "around $1,260 proved stalwart" and "suggests lingering interest to sell rallies."