By A. Ananthalakshmi
SINGAPORE (Reuters) - Gold extended gains to a third session on Monday, bolstered by safe-haven bids amid a softer dollar and jitters ahead of negotiations regarding Greece's future in the euro zone.
Spot gold edged up 0.5 percent to $1,235.50 an ounce by 0746 GMT, after gaining 0.6 percent in the previous session.
Traders were eyeing a meeting of euro zone finance ministers in Brussels later on Monday to find common ground with Greece's new government, elected on a pledge to scrap the austerity strictures of Greece's international bailouts.
If the meeting produces no results, there is a concern that Greece will be headed for a credit crunch that would force it out of the euro zone.
"Concerns about Greece's negotiations with its lenders should continue to support a safe-haven bid for gold," said Victor Thianpiriya, an analyst with ANZ.
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The metal also found support from a weaker dollar, which slid as data on Friday showed U.S. consumer sentiment unexpectedly fell in February from an 11-year high.
A soft dollar makes gold cheaper for holders of other currencies.
However, sentiment towards gold remained bearish as the outlook for the dollar remained upbeat, with many investors continuing to price in an interest rate hike by the U.S. Federal Reserve some time this year.
Any hike by the Fed, which has kept rates near zero since 2008 to stimulate the U.S. economy, could hurt demand for bullion, a non-interest-bearing asset.
Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.42 percent to 768.26 tonnes on Friday, while speculators cut bullish stances in gold futures and options for the second straight week during the week to Feb. 10.
CHINESE BUYING
Investors were also eyeing trade on the Shanghai Gold Exchange to gauge buying interest in the second biggest gold consumer before China goes on a week-long holiday for the Lunar New Year from Wednesday.
Gold jewellery and bars are popular for holiday gift-giving, and trading on the exchange is an indicator of demand levels.
Buying has been robust ahead of the holiday, though some traders warned that sales were still lower compared to last year.
"Physical demand out of China should keep the yellow metal trading $1,220-$1,235 over the next two days before the Lunar New Year break," said MKS Group, a trading firm.
(Editing by Himani Sarkar)