(Bloomberg) -- Gold swung between gains and losses in New York as investors weighed the outlook for a strengthening economy against speculation this month’s price drop may spur more physical buying.

Bullion closed at $1,193.60 an ounce on Dec. 19, the lowest since August 2010, after the Federal Reserve said it will reduce economic stimulus. U.S. data released yesterday showed consumer spending rose in November by the most in five months and consumer sentiment climbed.

Gold tumbled 28% this year, set for the worst annual drop since 1981, as equities rallied and the Fed said it will cut monthly asset purchases to $75 billion from $85 billion. The Standard & Poor’s 500 Index of stocks closed at a record yesterday after International Monetary Fund Managing Director Christine Lagarde said Dec. 22 the organization is raising its growth outlook for the U.S. economy in 2014.

Gold is pressured by “optimism that the U.S. economic recovery could accelerate in 2014,” Abhishek Chinchalkar, an analyst at Mumbai-based AnandRathi Commodities Ltd., said today in a report. Still, “market participants look reluctant in building fresh short positions as we head into the year-end holidays. Besides, gold seems to be supported by rising physical demand from China.” 

Bullion for February delivery rose 0.2% to $1,199.10 by 7:35 a.m. on the Comex in New York. Prices fell as much as 0.1% after gaining as much as 0.4%. Futures trading volume was 58% below the average for the past 100 days for this time of day, data compiled by Bloomberg showed. Gold for immediate delivery added 0.1% to $1,199.84 in London.

ETP Holdings

The metal is trading 38% below its record set in September 2011 and is heading for the first annual decline in 13 years. Holdings in gold-backed exchange-traded products declined 10.3 metric tons to 1,775.2 tons yesterday, the lowest since November 2009, data compiled by Bloomberg show.

“Investment demand continues to shy away from the metal,” Dominic Schnider, head of commodities research at UBS AG’s wealth-management unit, said in an interview on Bloomberg Television today. Investors aren’t looking “for insurance assets at the moment. They’re really looking at the growth outlook which is quite promising,” he said.

Silver futures for March delivery fell 0.3% to $19.355 an ounce in New York. Palladium futures for March delivery added 0.2% to $697.10 an ounce, after reaching $693.15 yesterday, the lowest since Oct. 4. Platinum for April delivery was little changed at $1,328.80 an ounce.

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