Gold Futures Kept in Check

Updated from 1:58 p.m. EST

Gold had a choppy session Monday as traders nervously awaited a big week of economic data.

After yo-yoing through the session, contracts for April delivery of bullion eventually settled $1.60 lower at $649.10 an ounce on the Comex division of the Nymex. The exchange-traded funds that hold the metal, streetTracks Gold Shares (GLD Quote) and iShares Comex Gold Trust (IAU Quote), were softer also, closing down about 0.5% and 0.7% respectively.

Of particular interest to traders this week will be the publication of the Federal Reserve's policy statement Wednesday afternoon.

"I think the Fed meeting is dominant in people's mind," says Gregory Miller, chief economist at SunTrust Bank in Atlanta. He notes that the economy appeared to speed up last month after a less robust October and November.

"December suggested we are past the worst," he says. "If the acceleration is confirmed, then the Fed will be less worried about [slowing] growth and less likely to ease."

In short, that would mean a reduced chance of policymakers lowering short-term interest rates. That would keep the dollar higher than some investors had previously anticipated, which would most likely be bad for gold because the metal tends to move inversely in value with the greenback.

The dollar was recently buying 121.94 yen, up from 121.60 late Friday. One euro would purchase $1.2954, up from $1.2913 previously.