Gold Falls to Lowest Levels in Over 4 Months After Upbeat US Manufacturing Report

Gold futures sank to their lowest levels since July after a positive report on US manufacturing increased the likelihood that the Federal Reserve will taper their $85 billion-per-month bond buying program at the December meeting.

ISM Manufacturing PMI

The Institute for Supply Management reported on Monday that manufacturing in the US accelerated in November, rising to 57.3% from 56.4% in October and reaching the highest level in over 2 years. The figure beat analyst expectations of 55.0%. ISM Manufacting readings above 50 indicate expansion.

Taper Expectations Rise

Recent positive economic data out of the US has fueled speculation that the Fed may taper at their upcoming meeting on December 18th. Investors will be watching closely this Friday, when the US Bureau of Labor Statistics will announce the latest non-farm payrolls and unemployment rate. The dual mandate of the Federal Reserve is to pursue maximum employment and stable prices, making Friday's employment report a potential pivot for upcoming policy decisions.

James Bullard, president of the St. Louis Federal Reserve Bank, addressed the possibility of tapering while speaking with Bloomberg TV in late November. He said, "It is definitely on the table, but it is going to depend on the data." He added, "A strong jobs report, I think, would increase the probability some for a December taper."

Gold's Yearly Losses

Bullion reached a record high of $1,923 an ounce in 2011 as central banks collectively engaged in dovish fiscal policy. However, since then the price of gold has fallen sharply, losing 25 percent in 2013 and potentially heading to the first annual loss in 13 years.

COMEX Gold Futures Daily Chart

Looking at the gold futures chart we can see that a Marubozu candlestick may form for the day. Potential support lies below at the prior low of 1178.80. Momentum indicator RSI is showing a reading of 31, close to entering potentially oversold conditions on the daily timeframe.