Gold bounced back from an earlier seven-week low early on Monday as the dollar pared gains after a bigger-than-expected fall in US data raised doubts about whether the Federal Reserve might raise interest rates this summer. Data on Monday showed that US home resales dropped to their lowest level in nine months last month at an annualised rate of 4.82 million units.
Spot gold dropped to its lowest level since January 9 at $1,191.01 an ounce before rebounding 0.5 percent to $1,208.30 by 1528 GMT. The metal has posted four straight weeks of declines, dented by a strong dollar, expectations of a US interest rate hike and hopes of a deal between Greece and its lenders. "The market saw some additional selling this morning on the back of the Greek deal news but has managed to find some support," Saxo Bank senior manager Ole Hansen said.
"$1,220 is really the level we need to move back above to say that we are through the worst." Gold started the day on a lower note after euro zone finance ministers late on Friday reached an agreement to extend heavily indebted Greece's financial rescue for four months, which had lifted the dollar and curbed demand for assets perceived as safe.
The metal was however lacking support from buyers in China, the world's No 2 gold consumer, where markets have been shut since Wednesday for the Lunar New Year holiday.
Silver rose 2 percent to $16.56 an ounce, while platinum dropped to a fresh 5-1/2 year low at $1,150.80 an ounce. Palladium rose 0.7 percent to $783.97 an ounce. Key events for gold prices this week could be Federal Reserve Chair Janet Yellen's semiannual address to the Senate Banking Committee on February 24 and a raft of US economic data.
"Janet Yellen's testimony ... will be picked over for any signs of when interest rates are going to rise... Gold is going to trade on the back of that," Mitsubishi Corp strategist Jonathan Butler. Hedge funds and money managers cut their bullish stance in gold futures and options for a third straight week, taking it to a six-week low in the week to February 17, data showed on Friday.
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