London/Melbourne: Gold swung between gains and losses in London as investors weighed stronger physical demand against better-than-expected US jobs data that increased speculation the Federal Reserve will slow stimulus.

The metal fell a record 23% in the second quarter, reaching $1,180.50 an ounce on 28 June, the lowest since 3 August 2010. The dollar was little changed against six major currencies after reaching the highest level since July 2010. The drop in gold prices has increased physical demand, analysts at Edelweiss Comtrade Ltd said in a report on Monday.

Bullion slipped 27% this year, wiping $62.5 billion from the value of gold-backed exchange-traded product holdings, after some investors lost faith in the metal as a store of value as Fed chairman Ben Bernanke said the central bank may slow asset purchases this year. Data released last week showed US employers added more jobs in June than economists estimated. Minutes of the Fed’s meeting last month are due on 10 July.

“The moderate improvement in the jobs market that should lead to quantitative-easing tapering remains on track," Jonathan Butler, a precious metals strategist at Mitsubishi Corp. International (Europe) Plc in London, wrote in a report on Monday. “The depth of the selling seen already may mean there is a short-term rally as physical buying and short covering emerges once again.

Gold price

Gold for immediate delivery rose 0.3% to $1,226.44 an ounce by 9.41am in London. It gained and declined as much as 0.6% earlier on Monday. Prices fell 0.9% last week. Bullion for August delivery climbed 1% to $1,224.60 on the Comex in New York. Futures trading volume was 18% above the average in the past 100 days for this time of day, according to data compiled by Bloomberg.

Gold as much as doubled from 2008 to a record $1,921.15 in September 2011 as the US central bank led nations in cutting interest rates and buying debt. Gold ETP holdings were at 2,009.6 tonnes on 5 July, the lowest since May 2010, data compiled by Bloomberg show. “The medium-term outlook is poor until jewellery demand rises sufficiently to offset investor fatigue," Macquarie Group Ltd said in a report on Monday.

The Fed is buying $85 billion of treasuries and mortgage bonds each month. Bernanke said on 19 June the central bank may reduce its bond-buying programme this year and end it in mid-2014 if growth meets policy makers’ estimates.

“We assume they’ll continue to follow on the same trajectory at looking at potentially limiting stimulus," said David Lennox, a resource analyst at Fat Prophets in Sydney. “I don’t think he’ll change his rhetoric," he said, referring to the Fed chairman.

Silver for immediate delivery added 0.2% to $18.9585 an ounce in London. It dropped 3.8% last week and is the worst performer in the Standard and Poor’s GSCI gauge of 24 commodities this year. Platinum rose 0.8% to $1,336.25 an ounce in London. Palladium was little changed at $683.03 ounce. Bloomberg