Gold was continuing to move higher for a third session on Monday thanks to increased safe-haven demand led by a weak dollar and worries before negotiations regarding Greece’s bailout and the future of the country’s membership in the euro zone.
Spot gold added 0.5 percent to reach at $1,235.50 an ounce, as of this writing, after rising 0.6 percent in the prior trading day.
The market shifted its focus on a meeting of euro zone finance ministers in Brussels later on Monday to get clearer picture about Greece’s new government, which came into power on a promise to bring changes to a massive bailout of the debt-wracked country by international creditors.
If the meeting fails to bring an agreement, it is likely to put Greece on track toward a credit crunch that would force it out of the euro zone.
“Concerns about Greece’s negotiations with its lenders should continue to support a safe-haven bid for gold,” said Victor Thianpiriya, an analyst with ANZ.
The yellow metal also found support as a result of a weaker dollar, which moved down as data on Friday disclosed U.S. consumer sentiment suffered sudden decline in February from an 11-year high. A soft dollar causes gold to become cheaper for holders of other currencies. However, gold is facing pressure as the outlook for the dollar remained positive, with many market participants hoping to see an interest rate hike by the U.S. Federal Reserve later in 2015.
The U.S. dollar continued to move lower versus the other major currencies in the Asian session on Monday after news that the nation’s consumer sentiment index showed bigger-than-expected drop for February.
If the Fed hikes interest rates, which has been maintained near zero since 2008 to help lift the U.S. economy, it is expected to hurt demand for bullion, a non-interest-bearing asset.
Holdings of the largest gold-backed exchange-traded-fund (ETF), New York’s SPDR Gold Trust, dropped 0.42 percent to settle at 768.26 tonnes on Friday, while speculators trimmed bets favoring gold futures and options for the second straight week during the week to Feb. 10.
“Physical demand out of China should keep the yellow metal trading $1,220-$1,235 over the next two days before the Lunar New Year break,” said MKS Group, a trading firm.
