11 June 2015
Gold Firm After 3-Day Rally on Sluggish Dollar, Greek Worries
(Reuters) - Gold held firm near its highest level in a week on Thursday, after a three-day rally sparked by a weaker dollar and safe-haven bids from the Greek debt crisis.
Spot gold was little changed at $1,185.75 an ounce by 0358 GMT. The metal closed up 0.8 percent on Wednesday after hitting a one-week high of $1,192.10.
The dollar tumbled to two-week lows against the yen on Wednesday after Japan's chief central banker said the yen was "very weak" and unlikely to fall further. The greenback also fell against the euro and a basket of major currencies.
A softer dollar makes gold cheaper for holders of other currencies, while also increasing the metal's safe-haven appeal.
"Gold is just mimicking U.S. dollar movements," said a precious metals trader in Sydney, adding that downside bias to price remains due to prospects of higher U.S. interest rates.
In the near term, gold was seeing some support from safe haven bids as Greece and its creditors continued talks to avert a default and a possible exit from the euro zone.
"We will see knee-jerk reaction if and when the default does happen but there won't be any long term ramifications for the market," said the trader.
Gold tends to see safe-haven bids during times of uncertainties, but the gains don't last for long.
Safe-haven gains in gold could also be undermined by continuous outflows from bullion funds.
SPDR Gold Trust, the top gold-backed exchange-traded fund, said its holdings fell 0.21 percent to 704.23 tonnes on Wednesday, the lowest since September 2008, reflecting bearish
Traders are now waiting for U.S. retail sales data later in the day for more clues about the strength of the economy and how that will affect the Federal Reserve's monetary policy.
Strong data could increase the prospects of a rate hike in September, a factor that could hurt demand for non-interest-paying bullion.