Resistance around $1260 for spot gold proved stalwart: Joni Teves, UBS

Spot gold, closing around $1235.45/oz Friday, has had a topsy turvey week, peaking at $1268.00 Tuesday and troughing Friday around $1220.48.

Joni Teves, precious metals analyst at UBS, says the resistance seen earlier in the week "around $1260 proved stalwart" and "suggests lingering interest to sell rallies."

Most things on the horizon (promising US budget negotiations, "diminished risks of a Federal government shutdown" and prospects of Fed taper) would seem to suggest improved risk sentiment and a higher dollar, which would weigh on gold, she says.

"The short-covering last week and subsequent retreat towards $1230 in a way reflects investors digesting the possibilities ahead of this week's FOMC meeting," Teves says.

The trading action also suggests a desire to be square ahead of a risk event so close to year-end. " Liquidity is poor and flows are sporadic - sizeable trading volumes come in bursts, typically via sweeps on Comex, and swiftly evaporate. Then the market trades quietly until the next big flow comes," Teves observes.