I noticed that you haven't had any responses yet but it might be because your question is a bit vague and therefore might not be able to elicit a reply from someone who knows the problem.
What model and year is the car and when you say bouncing, do you mean all the time or intermittent? Does the bouncing speed up as the road speed increases?
Also, in-spite of the bouncing, does the speedo generally read fairly accurately.
I have a VDO speedo in my 4/4 and to the best of my knowledge there is no capacitor connected directly to it.
But could be a totally different model hence, give us a bit more to go on please.