LONDON: Gold rose for a third straight session on Wednesday, bolstered by a softer dollar and worries over the Greek debt crisis, but a looming US interest rate increase and outflows from bullion-backed funds capped the upside.

Spot gold climbed as much as 1.1 per cent to a one-week high of $1,189.60 an ounce and was up 0.9 per cent at $1,186.81 by 1138 GMT.

“Everyone is piling up their bets for the safe heaven as we are moving closer and closer to no deal for Greece,” AvaTrade chief analyst Naeem Aslam said.

A planned meeting between the leaders of Germany, France and Greece on Wednesday was in doubt as Greece’s reform proposals to unlock new funding to ward off a debt default fell well short, European Union officials said.

Gold was also helped by a slide in the dollar, which fell 0.3 per cent versus a basket of leading currencies, mostly in reaction to a comment from the Bank of Japan governor that the yen was unlikely to fall further because it was already “very weak”.

But an eight-month high in 10-year US benchmark bond yields could keep gold below the important $1,200 mark, analysts said.

As gold pays no interest, the rise in returns from US bonds and other markets is seen as negative for the metal.

Strong US data, including Friday’s report showing solid increases in employment, and recent comments from top Fed officials suggesting a rate hike is likely later this year pushed gold to its lowest since March 19 at $1,162.35 on Friday.

Higher US interest rates would increase the opportunity cost of holding dollar-denominated bullion.

Traders were now waiting for US retail sales data on Thursday for clues about the strength of the economy and how that will affect the Federal Reserve’s monetary policy.

Also capping gold’s gains were outflows from exchange-traded funds (ETFs).

Holdings in top gold ETF SPDR Gold Trust fell to their lowest since January at 705.72 tonnes on Tuesday.

“We continue to see outflows from ETFs and this may limit price moves to the topside,” MKS Group said in a note, adding that $1,170 continues to provide support.

Friday’s drop to an 11-week low failed to draw much interest in the world’s top two buyers, equities-obsessed China and India, where worries about a poor monsoon and a lack of wedding-related buying were holding down demand.

Spot platinum was up 0.9 per cent at $1,111.49 an ounce. Silver rose 1.1 per cent to $16.10 an ounce, while palladium gained 0.7 per cent to $744.55 an ounce.