Gold Gains for Third Session on Greek Debt Worries

London: Gold rose for a third straight session on Monday, due to a weaker dollar as a meeting of euro zone finance ministers on how to proceed with Greece's bailout programme got under way.

Spot gold was up 0.2 per cent at $1,230.96 an ounce by 1519 GMT, while US gold for April delivery was up $3.90 at $1,231.00 an ounce. Liquidity is seen thinning through the day due to a national holiday in the United States.

Spot gold posted its third consecutive weekly drop last week, undermined by bearish investor sentiment and prospects of higher US interest rates.

"Any reaction to headlines or progress on Greece is going to be deferred somewhat as the US is on holiday today and Asian players are winding down for the Chinese New Year holiday starting later this week," Standard Bank analyst Leon Westgate said.

The dollar fell 0.2 per cent against the euro and European stocks edged lower as euro zone finance ministers, together with European Central Bank President Mario Draghi, resumed talks.

If the meeting produces no results, Greece could be headed for a credit crunch that would force it out of the euro zone.

Broader sentiment towards gold remained bearish as the outlook for the dollar was still upbeat, with many investors continuing to price in an interest rate increase by the Federal Reserve some time this year.

Any hike by the Fed, which has kept rates near zero since 2008 to stimulate the US economy, could hurt demand for non-interest-bearing bullion.

Speculators cut bullish stances in gold futures and options for the second straight week in the week to February10.

"The data shows a significant amount of long liquidation, so that market sentiment of buying gold just because things may not go so well, has now started to be liquidated," Westgate said.

On the physical markets, traders were monitoring buying interest in the world's second-biggest gold consumer, China, before the country goes on a week-long holiday from Wednesday for the Lunar New Year.

Gold jewellery and bars are popular for holiday gift-giving, and trading on the exchange is an indicator of demand. Buying has been robust ahead of the holiday, though some traders said sales were still lower compared with last year.

Silver was unchanged at $17.27 an ounce. Platinum lost 0.3 per cent to $1,200.74 an ounce, while palladium was up 0.2 per cent at $786.72 an ounce.