Singapore: Gold inched up on Wednesday as the dollar took a breather after recent sharp gains and as caution prevailed in financial markets regarding Greece's future in the euro zone. The uncertainty over Greece debt issues has somewhat helped gold in recent days, but the metal is still down nearly 4 percent so far this month as a strong dollar and expectations of an interest rate hike in the United States have hurt the metal.
Spot gold rose 0.3 per cent to $1,237.40 an ounce, following a 0.4 per cent drop on Tuesday that sent it closer to a three-week low of $1,228.25 reached last week. Economic and financial uncertainties tend to boost demand for gold, seen as a safe-haven investment.
"Without risk-related buying, gold may face further pressure in the near-term," said HSBC analyst James Steel. "Gold may also be weighed down by Fed policy, especially if the market comes to believe that a rate hike is likely in June." "Gold may have to trade closer to $1,200 before emerging market demand is stimulated sufficiently to halt the price slide," he said.
All eyes are on Europe, where the probability of Greece's exit from the euro zone has risen in recent days as Prime Minister Alexis Tsipras has taken an increasingly hard line over government debt.
European Commission President Jean-Claude Juncker told Greece not to expect the euro zone to bow to Tsipras' demands in a growing confrontation that has rattled financial markets and prompted U.S. and Canadian pleas for calm and compromise. Euro zone finance ministers meet later on Wednesday and EU leaders on Thursday, but officials are already downplaying the chance of a breakthrough.
Asian stock markets were subdued on Wednesday as the looming euro zone meetings overshadowed a firmer finish on Wall Street. Traders were also eyeing comments from Federal Reserve officials on the timing on any rate increase.
The Fed should raise interest rates in June, a top Fed official said on Tuesday, saying the US economy is strengthening and that inflation will move back to the central bank's target. Any hike by the Fed, which has kept rates near zero since 2008 to stimulate the U.S. economy, could further strengthen the dollar and possibly hurt demand for bullion, a non-interest-bearing asset.
The dollar eased on Wednesday against a basket of major currencies but it wasn't too far from a 11-year peak hit late last month.
A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies. Among other precious metals, silver rose nearly 1 per cent, while platinum and palladium were also well supported.
