Gold ends at 1-week high on soft dollar, Greece worries

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Gold rose for a third straight session on Wednesday, bolstered by a softer dollar and worries over the Greek debt crisis, but a looming U.S. interest rate increase and outflows from bullion-backed funds capped the upside.

climbed as much as 1.3 percent to a one-week high of $1,192.10 an ounce and was up 0.8 percent at $1,186 an ounce. U.S. gold futures for August delivery closed up $9 on the day, at $1,186.60 an ounce—the highest since June 3.

"Uncertainty around Greece and a softer dollar are definitely helping today...there is good support in the $1,180 area right now," MKS SA senior vice president Bernard Sin said.

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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, despite a plethora of negative comments in private from EU officials.

"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 0.3 percent versus a basket of leading currencies, mostly in reaction to a comment from the Bank of Japan governor that the yen was unlikely to fall further because it was already "very weak".

But an eight-month high in 10-year U.S. benchmark bond yields could keep gold below the important $1,200 mark, analysts said.

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As gold pays no interest, the rise in returns from U.S. bonds and other markets is seen as negative for the metal.

Strong U.S. data, including Friday's report showing solid increases in employment, and recent comments from top Fed officials suggesting a rate hike is likely later this year pushed gold to its lowest since March 19 at $1,162.35 on Friday.

Higher U.S. interest rates would increase the opportunity cost of holding dollar-denominated bullion.

Traders are now waiting for U.S. retail sales data on Thursday for clues about the strength of the economy and how that will affect the Federal Reserve's monetary policy.

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However, long-term investors remained bearish towards gold, as outflows from exchange-traded funds (ETFs) continued.

Holdings in top gold ETF SPDR Gold Trust fell to their lowest since January at 705.72 tonnes on Tuesday.

Friday's drop to an 11-week low failed to draw much interest in the world's top two buyers, equities-obsessed China and India, where worries about a poor monsoon and a lack of wedding-related buying were holding down demand.

Spot platinum was up 0.9 percent at $1,112.24 an ounce. Silver rose 0.3 percent to $15.99 an ounce, while palladium gained 0.1 percent to $741 an ounce.