Gold slips on strong dollar, holds above $1,200/oz

London (Jan 7)   Gold eased slightly on Wednesday after a three-day winning streak as the dollar and equities strengthened, but prices held above $1,200 an ounce and near their highest in three weeks on worries about Greece's political situation.

Spot gold eased 0.4 percent to $1,213.86 an ounce by 1038 GMT, after jumping to its highest since Dec. 15 at $1,222.40 in the previous session, due to tumbling equity markets.

U.S. gold futures for delivery in February fell 0.3 percent to $1,215.20 an ounce.

Gold's near-term resistance for the closing price is expected at $1,220, while a close above that level would shift the focus to further gains, with a target of $1,250, technical analysts at ScotiaMocatta said.

"Prices recovered above $1,200 as all these worries about Greece's future in the euro zone increased some safe-haven bids, but unless the situation worsens, this should just give temporary support to gold," Julius Baer analyst Carsten Menke said.

"The longer-term outlook remains one of progressive economic recovering in the United States leading to a first interest rate hike in the second half of the year."

The dollar rose 0.4 percent against a basket of major currencies, trading close to a nine-year peak and making dollar-denominated gold more expensive for holders of other currencies.

Investors waited for the U.S. Federal Reserve's December meeting minutes, which should give markets some clues as to the timing of interest rate rises.

Gold has benefited from years of increased central bank liquidity and a low interest rates environment, while higher U.S. interest rates would encourage investors to put money into interest-bearing assets like stocks and bonds.

The metal was also undermined by the sharp oil price drop, which reduces gold's appeal as a hedge against oil-led inflation, and recovering European stocks, which halted a three-day fall that was due to mounting concerns over Greece's future in the euro zone.

However, increasing speculation that Greece might exit the euro zone if a left-wing party that wants to cancel austerity measures wins the Jan. 25 elections could lift gold's demand from investors looking for protection, traders said.

The metal had regained the important $1,200 level for the first time in three weeks on Tuesday, also boosted by softer-than-expected U.S. economic data, which added to its appeal as an alternative investment.

Silver fell 0.8 percent to $16.37 an ounce, while platinum was up 0.1 percent at $1,214.50 an ounce and palladium lost 0.4 percent to $796.50 an ounce.

Source: Reuters