SINGAPORE: Gold gained 1 per cent on Monday after posting its biggest quarterly fall ever, as bearish economic data from China hurt Asian stocks and boosted bullion's safe-haven appeal. Comments from a US Federal Reserve official on the need to maintain the bank's stimulus measures for longer also helped gold recover some losses from last week when it fell 5 per cent to three-year lows. Investor confidence in the metal has been eroded after it plunged 23 per cent in April-June, as fears over an early end to the Fed's $85 billion monthly bond purchases hurt gold's appeal as an inflation hedge. "What really needs to happen now for gold to regain the trust of investors is that at the very least it needs to consolidate for a few days and gain a little bit more credibility," said a precious metals trader in Hong Kong. Spot gold rose 0.75 per cent to $1,242.40 an ounce by 0644 GMT, while Comex gold rose about $18 to $1,241.80. Gold fell below $1,200 an ounce last week for the first time since 2010. Outflows from gold backed exchange-traded funds (ETFs) have accelerated due to the recent decline in prices. Outflows from SPDR Gold Trust, the largest gold ETF, have totalled nearly 13 million ounces so far this year. "Every time prices try to come back, there seems to be steady selling coming out of the West," the trader said. Hedge funds and money managers slashed their bullish bets in gold futures and options to their lowest levels in six years, as bullion prices fell to a three-year low, a report by the Commodity Futures Trading Commission showed on Friday. San Francisco Federal Reserve Bank President John Williams said on Friday he had backed off from his earlier view that the Fed should start cutting back on stimulus this summer in part because inflation has been lower than he expected. Asian equities edged lower on Monday after China's factory activity reached its lowest in nine months in June, deepening worries about the world's second-largest economy. WEAK PHYSICAL DEMAND Despite gold prices being close to three-year lows, strong physical demand from India and China - the top two gold consumers - has failed to materialize. In April, Asian demand helped cap some of the metal's losses when prices fell the most in 30 years. However, this time demand has not picked up to the same levels, dealers and traders have said. Barclays cut its forecast for gold prices on Monday, citing weak demand and ETF outflows. "While the physical market was able to suspend the downward trajectory of gold in April following hefty disinvestment, this time, preliminary data suggest a much weaker physical market footing," Barclays analysts said in a note. Sales of American Eagle gold bullion coins plunged to 57,000 ounces in June, the lowest sales since August last year, as physical demand from retail investors and collectors sank, according to data on the US Mint's website on Friday.

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