Gold prices rose for a third straight session early on Wednesday, bolstered by a softer dollar and worries over the Greek debt crisis, but a looming US interest rate increase and outflows from bullion-backed funds capped the upside. Spot gold climbed as much as 1.4 percent to a one-week high of $1,192.10 an ounce and was up 0.8 percent at $1,185.96 by 3:05 pm EDT (1905 GMT). US gold futures for August delivery settled up $9 at $1,186.60.
"Uncertainty around Greece and a softer dollar are definitely helping today ... there is good support in the $1,180 area right now," Bernard Sin, MKS SA senior vice president, said. Greece said on Wednesday its international creditors had failed to respond to its latest proposal on breaking an impasse over a cash-for-reforms deal. "Everyone is piling up their bets for the safe haven as we are moving closer and closer to no deal for Greece," AvaTrade chief analyst Naeem Aslam said.
Gold was also helped by a dip in the dollar, which fell as much as 0.9 percent against a basket of currencies. An eight-month high in yields of US benchmark Treasury 10-year notes, however, could keep gold below the important $1,200 mark, analysts said. As gold pays no interest, the rise in returns from US bonds and other markets is seen as negative for the metal.
Strong US data, including Friday's report showing solid increases in employment, and recent comments from top Federal Reserve officials suggesting a rate hike is likely later this year had pushed gold to its lowest since March 19 at $1,162.35 on Friday. Higher US interest rates would increase the opportunity cost of holding dollar-denominated bullion. Traders are now waiting for US retail sales data on Thursday for more clues about the strength of the economy and how that will affect the Fed's monetary policy.
Long-term investors remained bearish towards gold, as holdings in top gold ETF SPDR Gold Trust fell to their lowest since January at 705.72 tonnes on Tuesday. Spot platinum was up 0.7 percent at $1,110 an ounce. Silver rose 0.2 percent to $15.97 an ounce, while palladium gained 0.3 percent to $742.25 an ounce. "The platinum group metals face a number of challenges in the near term," said Barclays Commodities Research in a note.