Gold fell for a third session on Monday on fears the US Federal Reserve could soon begin tapering its bond-buying stimulus after a stronger-than-expected jobs report, and as the dollar hit a three-year high.

Bullion, typically seen as a hedge against inflation, has fallen 10 per cent since Fed Chairman Ben Bernanke said last month the US economy was recovering strongly enough for the central bank to reduce its $85 billion monthly bond buying stimulus later this year.

US employers added 195,000 new jobs to their payrolls last month, exceeding expectations of 165,000 and supporting the case for a Fed pullback.

"The jobs report is pulling gold prices down," said Peter Fung, head of dealing at Hong Kong's Wing Fung Precious Metals.

"Some physical buying interest supported prices earlier but we could test $1,200 again today."

Gold for immediate delivery fell 0.4 per cent to $1,218.19 an ounce by 0241 GMT following a 2 per cent decline on Friday. Comex gold was higher by about $5 at $1,217.90.
    
Spot gold is expected to revisit its June 28 low of $1,180.71 per ounce as it may have resumed its primary downtrend, Reuters technical analyst Wang Tao said.
 
The US dollar rose 1.5 per cent and hit a fresh three-year high against a basket of major currencies in Asia on Monday.
 
Gold posted its biggest quarterly loss on record, down 23 per cent for April-June, and fell below $1,200 for the first time in nearly three years after Bernanke's comments on stimulus tapering.

The Fed is likely to begin shrinking the size of its debt purchase program, intended to prop up economic growth and support the labour market, by September, according to a majority of economists at large Wall Street firms.

"Gold is in a technically ideal range around which to form a base over the medium term, but we expect further downside from here, with the market looking to test the previous near-term low of $1,180, particularly if US data continues to surprise on the upside," ANZ analysts wrote in a note.

Liquidations from gold-backed exchange-traded funds continued, signalling waning interest in the metal. SPDR Gold Trust, the world's largest gold ETF, said its holdings fell to a four-year low of 961.99 tonnes on Friday. - Reuters