Next week the FOMC will meet for one their eight scheduled meetings. It is this particular meeting that has had traders, market commentators and investors almost in frenzy as they try to predict the outcome. It seems everyone is convinced that tapering will go ahead, as of next week, and the gold bears believe thatthis will signal gold's demise.

Given the drop in the gold price each time tapering is merely hinted at, one might not be surprised at this prediction. However, as we have learnt since April's gold price drop, gold investors continue to stock up on gold regardless of what they pay for it. We believe the same will be the case if and when tapering begins.

Tapering will not stop gold buying

Our new research suggests that tapering, irrespective of the gold price's response, will not have a negative effect on gold bullion investments.

A month ago we asked our clients and readers how tapering would affect their approach to their gold investments.

We gave them five options to choose from with their reply:

I will start selling heavily
I will sell a little
I will not change my holdings
I will buy more
I will buy lots more

The response was, in a word, bullish.

The belief that gold investing will cool-off once the Fed cuts back asset purchases has its roots in the theory that says investors only buy gold as a reaction to the FOMC's decisions. But our data shows that this is a misunderstanding.

In fact, this only appears to be the case for just 6% of respondents. It was this small group who told us that they would sell their gold, should tapering begin.

We believe this is a fair representation of the general approach to physical gold investment. Just a small minority of investors believe the tapering of QE is not only the equivalent to unwinding but is also a guarantee that the negative repercussions of easy monetary policy will not come to fruition. It also suggests that this small group believe gold will not respond to the developments in other countries and on other central bank sheets.

Gold bulls

Over 55% of those polled told us that tapering would mean they would buy more gold. These individuals are likely to believe a combination of two factors; the first is that they believe any cut is trivial and that gold will not become irrelevant because of this decision; the second is that they do not just focus on one committee's single decision when choosing their investments.

As we had expected our most popular answer, by just 2.17%, was 'I will not change my holdings'. We had expected this as our experience of gold investors is that they pay very little attention to the short-term changes in the economy and statement. These individuals, like those increasing their holdings, believe gold is a long term investment. They are aware that the supply of this investment is stable compared to that of all other currencies in the world and one committee's decision will not affect this simple fact.

Unlike the 6% mentioned above, the majority of respondents believe they still need to hold gold regardless of the FOMC's actions.

They may believe that the Fed cannot exit, or taper, QE without causing irreparable damage to the markets. The very same markets that the US's QE was designed to prop up.

Or they may hold gold because it's what they hold regardless of a central bank's decision. In the last few months this has been perfectly demonstrated. As we reported in earlier research, the nature of gold demand is changing. Rather than responding to new changes in the economy by moving away from gold, investors are instead moving away from paper gold and into physical gold.

Blinded by the Fed

Tapering is, like anything, a possibility. But it is not a wind-down of QE. Dollars will still be printed along with pounds, euro and yen. In April, Sprott Asset Management showed that the growth of central bank balance sheets and the gold price are highly (95%) correlated. It seems at present markets and commentators have become blindsided by the Fed and their actions. This is despite the results of those actions are yet to culminate and the decisions of other central banks.

Our research shows that the possible tapering by one central bank, is not enough to convince gold investors that their game is up. For starters, there are plenty of others to draw our attentions to. We are now seeing extraordinary decisions being made outside of the US: Mark Carney, of the Bank of England is clearly already adopting many of the Fed's strategies; in Japan they are pursuing an aggressively loose monetary policy; and in the EU they have a 'highly accommodative' approach.

Our research shows that when it comes to gold bullion investing the majority of respondents are long-sighted enough to see further issues on the horizon.

The attitude of respondents to either maintain or increase their holdings suggests one of two things. They either expect more damage to come from the FOMC's (and other central banks') monetary policy actions or they do not hold gold because of the decision of one committee. Instead, they hold gold because it is a currency, not a commodity, and a relevant alternative at that.

Further research is required but I suspect the majority of respondents own gold as an alternative asset. They do not hold it because of a decision a central bank may or may not take, rather they hold gold because it is has endurance, it is a faceless currency with a limited supply and no end of fundamentals of which the Federal Reserve is just one of.

Our research shows that gold will not become irrelevant because of a few billion dollars. The Fed and its contemporaries will have to work a lot harder to convince investors that they do not need to hold gold.