Gold Under Pressure Despite Dovish Fed

Gold futures are trading lower on Monday in the wake of posting a weekly gain after Federal Reserve Chairwoman nominee Janet Yellen testified at her confirmation hearing before the Senate Banking Committee.

Bullion was boosted by Yellen's remarks that raised expectations the Federal Reserve will maintain its $85 billion-a-month bond-purchase program for the near future.

However, it appears that the market may have already priced in Yellen's nomination and the possibility that tapering will be delayed into 2014.

Equity Markets and Inflation Rate

Record highs in equity markets have added pressure to gold, with the S&P 500 posting six consecutive weekly gains and closing last week at record levels.

Meanwhile the rate of US inflation, running at 1.2 percent as of September 2013, is dampening demand for the yellow metal as a store of value.

Commitment of Traders Report

The weekly "Commitment of Traders" report from the US Commodity Futures Trading Commission, for the week ending November 12, showed that hedge funds and money managers sharply scaled back gold exposure.

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 almost 25% in 2013 and potentially heading to the first annual loss since 2000.

Paulson's GLD Stake

Hedge fund manager and long time gold bull John Paulson, despite having cut his gold holdings, is still the largest investor in the SPDR Gold Trust (GLD), holding over 10 million shares as of September 30 according to a filing with the U.S. Securities and Exchange Commission.

Paulson stated his views on gold and inflation at the Delivering Alpha conference; "I would say that the rationale for owning gold has not gone away. The consequence of printing money over time will be inflation, it's just difficult to predict when."

Gold Daily Chart

Looking at the COMEX gold futures daily chart we can see that price is well below both the 200 and 50 period simple moving averages. Potential downside support lies in the area of the prior low of 1253.93