The gold price surged nearly $40 an ounce at one point on Monday as the metal recovers from one of its worst quarterly performances in history.
In late afternoon trading gold pulled back from a day high of $1,262 an ounce notching gains of 2.3% or $28.40 an ounce at $1,252.60 as bargain hunters stepped in to make the most of a slightly weaker dollar.
The precious metal lost 5% last week hitting three year lows below $1,200 an ounce and ending the second quarter with a loss of 23% on the back of a surging dollar. It was the worst quarterly decline since modern trading began in the mid-1970s according to FactSet.
The most recent sell-off on precious metals markets came after chairman Ben Bernanke hinted the US Fed Federal Reserve's ultra-loose monetary policy may come to an end this year.
When the Fed starts tapering off QE, which floods markets with cheap money, it will further strengthen the US dollar and tarnish gold's status as a storer of wealth.
UK bank Barclays on Monday lowered its gold price forecast for 2013 on the back of weak sentiment in the market and a lack of investment buying.
Barclays now forecasts that the gold price will average $1,393 an ounce in 2013 down from its earlier projection of $1,483 an ounce.