Gold had fallen on Thursday after the Minutes of the Fed meeting had hinted at the possibility of QE3 tapering.

International gold prices also declined through most of the week and gold is now set for the largest drop in two months.

Spot gold had risen to $1,245 an ounce. The precious metal has been moving in tandem with news emanating regarding the timing of the Federal Reserve's quantitative easing programme.

The Federal Reserve has been buying assets also called the quantitative easing programme to the tune of $85 billion. This has ensured abundant liquidity in the global financial system, which has found its way into stocks and gold.

Any withdrawal of this liquidity could badly affect gold prices.

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