Gold held above a five-week low on Friday amid a weaker dollar and uncertainty over debt-laden Greece, but the safe-haven metal was set to close down for a third straight week on expectations of higher US interest rates.

Spot gold had climbed 0.4 per cent to $1,227 an ounce by 0323 GMT. The metal hit a five-week low of $1,216.45 in the previous session, before recovering to close up 0.3 per cent.

“Support for gold was well pronounced around the 100-day moving average of $1,216 and this level should hold over the short term as we await Monday’s renewed Greek debt negotiations,’’ said MKS Group trader Sam Laughlin, adding that the next level of support was at $1,200.

Bullion has seen some upside recently as equity markets have been hit by confusion over Greece’s debt negotiations with its European lenders and its future in the euro zone.

Greece had agreed on Thursday to talk to its creditors about the way out of its international bailout in a political climbdown that could prevent its new leftist-led government running out of money as early as next month.

US economic data

A weaker dollar after bleak US economic data on retail sales and jobless claims also supported gold by making the commodity priced in the greenback cheaper for holders of other currencies. However, that was not enough to offset bullion’s losses for the week that are set to come in at about 0.5 per cent.

The outlook for the dollar remained upbeat despite recent losses as many investors continued to price in an interest rate hike by the Federal Reserve sometime this year.

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

SPDR Gold Trust

Bearish sentiment towards gold was seen in investor holdings. SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.23 percent to 771.51 tonnes on Thursday.

In the physical markets, Chinese buying remained stable ahead of the Lunar New Year holiday next week as prices remained near $1,200.

Premiums on the Shanghai Gold Exchange traded at about $3-$4 an ounce on Friday, unchanged from the previous session. Physical gold sales in Europe jumped in January as concerns over the euro zone’s outlook sparked by central bank action and anti-bailout party Syriza’s victory in Greek elections drove consumers to load up on bullion.

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