By Nicholas Larkin and Kim Kyoungwha July 9 (Bloomberg) -- Gold fluctuated near $1,200 an ounce in London as the metal’s third consecutive weekly drop prompted some investors to increase holdings. European Central Bank President Jean-Claude Trichet said indicators suggested economic activity in the region was strengthening. The dollar was little changed against the euro after earlier trading at an eight-week low, while European equities rose for a fourth day. Gold fell to a six-week low of $1,185 on July 7 and a third weekly drop would be the worst run since the beginning of February. Gold remains “vulnerable short-term to further bouts of long liquidation as broader risk sentiment increases,” said James Moore, an analyst at TheBullionDesk.com in London. “However, dips in gold continue to find pockets of investment bargain-hunting.” Gold for immediate delivery added 22 cents to $1,198.32 an ounce at 9 a.m. in London. Prices swung between a gain and loss of 0.3 percent and are down 1.1 percent this week. Bullion for August delivery was 0.2 percent higher at $1,199 on the Comex in New York. Gold has weakened 5.3 percent since reaching a record $1,265.30 an ounce on June 21, limiting this year’s advance to 9.2 percent. The metal gained this year as investors sought to protect their wealth from prolonged financial turbulence in Europe and on concern the global recovery may slow. “Indicators suggest that a strengthening in economic activity took place during the spring,” Trichet said at a news conference in Frankfurt yesterday. The ECB’s main interest rate, which it left unchanged at 1 percent, is at an “appropriate” level, and inflation expectations “remain firmly anchored,” he said. Buying on Dips Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, fell 0.45 metric ton to 1,316.04 tons yesterday, according to the company’s website. Global holdings of the metal by ETFs were little changed at 2,072.55 tons yesterday, according to Bloomberg data from 10 providers. Thirteen of 20 traders, investors and analysts surveyed by Bloomberg, or 65 percent, said bullion will climb next week. Four forecast lower prices and three were neutral. “Investors are likely to continue buying gold on dips below $1,200 and this may provide some support for gold prices,” said Ong Yi Ling, Singapore-based analyst with Phillip Futures Pte Ltd. “Our support for gold continues to be pegged at the $1,185 level and hence downside risks appear to be capped.” Silver for immediate delivery in London was 0.4 percent lower at $17.895 an ounce. Platinum was little changed at $1,521 an ounce, and palladium was down 0.1 percent at $447.17 an ounce. --Editors: John Deane, Alastair Reed. To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Kyoungwha Kim in Singapore at Kkim19@bloomberg.net. To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

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