Gold rate edged lower on Monday, dragged down by the euro after a weekend emergency summit to tackle Greece’s debt crisis yielded no deal and with the U.S. Federal Reserve still on track to raise interest rates this year.
Greece will now be required to push legislation through parliament this week to convince its euro zone creditors to release funds to avert a state bankruptcy and start negotiations on a third bailout programme estimated at up to 86 billion euros ($95.5 billion).
The news weighed on the euro, making dollar-denominated assets such as gold more costly for holders of other currencies.
Spot gold was off 0.2 percent at $1,161.10 an ounce by 0156 GMT, after falling for a third straight week.
Also a drag on gold were signals from Federal Reserve Chair Janet Yellen on Friday suggesting that the U.S. central bank is on course to raise interest rates within this year.
Expectations that the Fed would lift interest rates at some point this year had weighed on bullion prices, which touched a four-month low last week. It had been largely on a decline since hitting a high of $1,232 in mid-May.
“We are bearish toward gold prices and the underlining factor for this is our expectation that the Fed will raise interest rates by the third quarter,” said OCBC Bank analyst Barnabas Gan, who sees gold at $1,050 by year-end.
Gan said the Fed rate hikes could be a “minimum of one, maximum of two” this year, depending on how the U.S. labor market fares.
Yellen said the while the U.S. economy should grow steadily for the remainder of the year, allowing the Fed to move with its first rate hike in nearly a decade, she stressed that U.S. labour markets remain weak and that more workers could be encouraged back into the job market with stronger growth.
Hedge funds and money managers bailed out of COMEX gold and silver futures and options at the fastest pace in at least a year in the week to July 7, at the height of the commodities market’s biggest rout in years, data on Friday showed.
Speculators hit gold the hardest even after Greece rejected terms of a bailout for the stricken country’s debt, cutting their net long by 13,906 lots to 7,574 contracts, according to data from the U.S. Commodity Futures Trading Commission.
Physical demand for gold remained tepid last week as prospective investors in China chased bargains in equities after a market selloff, while those in India delayed purchases.
U.S. gold for August delivery gained 0.2 percent to 1,160.50 an ounce.