Gold subdued as Fed seen staying on tapering path

GOLD - JAKARTA. Gold prices were subdued on Monday on fears that the U.S. Federal Reserve will start paring its stimulus this year despite Friday's weak jobs data.

Spot gold inched 0.1% lower to $1,755.68 per ounce by 0556 GMT, while U.S. gold futures fell 0.1% to $1,755.30.

"The payrolls data is not going to do anything to stop the Fed from tapering... Labor shortage is feeding into higher wage pressures and that could exacerbate inflation even further, which will mean that they'll eventually have to step in," said IG Market analyst Kyle Rodda.

Bullion is seen as a hedge against inflation and currency debasement likely from the widespread stimulus. The Fed's tapering could tackle both those conditions, diminishing gold's appeal.

"The gold market is having a lot of trouble making odds and ends of where it should go from here. My personal bias is to the downside, but we're stuck in a range in the moment," Rodda said.

The Fed may move to begin reducing its support for the economy next month despite the slowdown in jobs gains last month.

Data on Friday showed U.S. nonfarm payrolls increased by 194,000 jobs in September below economists' forecast of 500,000. Meanwhile, the unemployment rate dropped to an 18-month low of 4.8% and wage gains accelerated.

The dollar rose to its highest level in nearly three years versus the yen, while Benchmark U.S. 10-year Treasury yields touched their highest level since early June on Friday, increasing the opportunity cost of holding non-interest bearing gold.

Spot gold may bounce into a $1,763-$1,768 range, before resuming its fall towards a support of $1,724, according to Reuters technical analyst Wang Tao.

Spot silver was unchanged at $22.66, while platinum rose 0.1% to $1,027.37.

Palladium gained 3% at $2,139.85, having earlier hit a peak since Sept. 13.