London: Gold edged higher on Thursday as the dollar retreated slightly and European equities dropped alongside fading optimism over a potential deal between Greece and its creditors.

Spot gold was up 0.2 percent at $1,190.20 (Dh4,368.03) an ounce, having hit a two-week low of $1,183.76 in the previous session because of a stronger dollar.

U.S. gold futures for June delivery rose $2.70 to $1,188.30 an ounce.

“There is some support from the Greek situation, but we don’t expect any major price rises for the time being,” Commerzbank analyst Daniel Briesemann said, adding that gold is likely to remain stuck around the $1,200 level while uncertainty persists over Greece and U.S. interest rates.

Investors were monitoring updates from a meeting of G7 ministers and central bank heads in Germany, where the Greek situation will be discussed on the sidelines.

A worsening of the Greek debt crisis could potentially trigger demand for gold coins and bars.

Greece and its international creditors have converged on key points on a cash-for-reforms deal but talks still have some room to cover before an agreement is clinched, the country’s economy minister said on Thursday.

Gold is usually seen as a hedge against political and financial risk, though the impact on demand from wider political worries is usually short-lived.

The dollar, meanwhile, was down 0.3 percent against a basket of leading currencies, retreating from a one-month high, while European shares gave back some of the previous session’s gains.

Consumer confidence

The U.S. currency will be an important factor in gold’s near-term direction, HSBC said in a note, adding that $1,180 was the next big support level for bullion.

Gold fell 1.7 percent on Tuesday, its sharpest one-day drop since April, after U.S. data showed strong core business spending, new home sales and consumer confidence.

The robust U.S. releases added to views that the Federal Reserve will raise interest rates soon.

The dollar had been well-bid since Fed Chair Janet Yellen said last week that the central bank was poised to raise rates later this year.

Data on U.S. weekly jobless claims and pending home sales due later on Thursday will be watched for trading cues.

Higher U.S. interest rates increases the opportunity cost of holding non-yielding bullion.

In the physical markets, China’s net gold imports from main conduit Hong Kong fell to an eight-month low in April, data showed on Thursday.

Silver was up 0.1 percent at $16.65 an ounce, having hit its lowest since May 13 at $16.55 an ounce on Wednesday.

Platinum rose 0.2 percent to $1,119 an ounce while palladium gained 0.3 percent to $786 an ounce.