Small drop ahead of FOMC meeting tomorrow

After three days of gains, traders are trimming up long positions in gold ahead of tomorrow’s FOMC decision.   The positive correlation to the euro persists, for whatever reason; and even though the euro is up 60 basis points today, gold is selling off.  The euro altogether dismissed news yesterday that Italian Prime Minister Monti has vowed to resign once the domestic budget for 2013 is passed.  Despite it moving higher over the last two days, the 1.31 to 1.32 area is still a monstrous level of resistance for it to overcome in the short to medium terms.  In the quiet trading conditions of today, gold has managed so far to hang above initial support at $1,700.  Greater support is still in play at $1,685 should the $1,700 figure give way.

Physical demand, in terms of industrial and jewelry use in the Far East as well as coin and bar domestically in the U.S., has picked up significantly over the past month.   The U.S. Mint sold 129,500 of the 1 oz. Gold Eagle in the month of November.  This was the largest amount sold on a month to month basis in nearly two years.  For this year, it was the greatest amount sold by far and represented a 53.5% increase over the next best-selling month (January of 2012).  With the fiscal cliff looming and in the wake of the U.S. Presidential election, investors are evidently happy to flock to hard assets like physical gold.