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imageLONDON: Gold was flat on Friday after a sharp plunge during the previous session drew out some buyers but remained pinned down by rising expectations of an early end to US monetary stimulus after a slew of upbeat economic news.

Stronger-than-expected US retail sales data on Thursday, coming after last week's forecast-beating jobs report, has increased speculation the Federal Reserve could start winding down its bond purchases at its Dec. 17-18 meeting, although the market consensus is still for March.

"I don't think there'll be any substantial changes to the (Fed) policy or any big surprises," said Andrey Kryuchenkov, analyst at VTB Capital. "It will probably be a slightly hawkish statement preparing the market for the initial tapering in the first quarter of next year." Spot gold edged up 0.2 percent to $1,225.20 an ounce by 1108 GMT after slipping to $1,220.10, its lowest in a week and below the level reached on Thursday, when it dropped 2.2 percent, the biggest fall in ten days.

US gold futures for February delivery were down $1.50 at $1,223.50.

The Fed's massive bond-buying programme has supported bullion by pinning down interest rates and stoking inflation fears by flooding the markets with cheap dollars.

The metal is headed for its first annual decline in 13 years as investors, buoyed by a recovering global economy, channel more money into riskier assets such as equities by pulling funds from safe-haven gold. News that a US budget deal that would avoid a government shutdown in January sailed through the House of Representatives overnight lifted the dollar to a five-year high against the yen. A stronger dollar is negative for gold as it makes the metal more expensive to holders of other currencies.

"There's hardly any physical flows so you're still at the mercy of the dollar sentiment and expectations for the (Fed meeting) next week," Kryuchenkov said.

Holdings in SPDR Gold Trust, the biggest gold ETF, fell the most in nearly two months on Thursday.

The fund has not seen inflows in more than a month, hinting that a substantial upside in prices is limited.

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