Gold Futures Fall as Investors Await Results of Fed Policy Meeting

San Francisco (Dec 17)  Gold futures fell as investors awaited the results of a two-day Federal Reserve policy meeting beginning Tuesday where the central bank could indicate when it will begin scaling back its bond-buying program.

Also weighing on gold was the November reading of the consumer-price index, which was unchanged on a month-over-month basis for overall prices and up 1.2% from year-ago levels. The month-over-month reading was below analyst estimates of 0.1%, and the annual reading is below the Fed's inflation target of 2%, which is bearish for investors who view gold as an inflation hedge.

Gold futures for February delivery were down $10.40 or 0.9% at $1234.00 a troy ounce. Silver futures were down 31 cents or 1.5% at $19.79.

"We suspect that directional money has started to gravitate to the sidelines ahead of the Fed policy statement and that conditions will remain quiet," Edward Meir, an analyst with INTL FCStone, said in a note.

Market watchers are expecting the Fed to scale back its bond-buying program in the next few months as economic signals suggest a recovery is underway. Gold prices have fallen 26% this year in anticipation of the move. A policy announcement is expected Wednesday afternoon.

Meanwhile, Barclays said in a note that commodity investments are heading for record outflows after a disappointing year, driven by withdrawals from gold exchange-traded funds. Commodities have been the worst-performing asset class this year, with the Dow Jones-UBS Commodity Index down 9.5% year-to-date while the S&P 500 stock index is up more than 25%.

"We view 2014 as likely to be another difficult year for commodity investors as any clear and sustainable trends in prices will likely be few and far between," the bank said.

In other precious metal markets, platinum was down $8.30 or 0.6% to $1351.80, and palladium was down $4.00 or 0.6% to $712.35.