By Clara Denina
LONDON (Reuters) - Gold eased on Wednesday even as the dollar recovered losses versus the euro ahead of a policy update from the European Central Bank, while prospects increased of a debt deal for Greece.
Spot gold slipped 0.4 percent to $1,188.70 an ounce by 0959 GMT, while U.S. gold futures for August delivery fell $5.80 to $1,188.60 an ounce.
Gold had risen 0.4 percent in the previous session, only partly benefiting from a 1.5 percent fall in the dollar and weak U.S. factory data, which would typically trigger flight-to-safety bids. Higher European bond yields capped the upside for gold, analysts said.
"I still believe gold will go lower in coming months, but at the moment there is not enough momentum to push the market in that direction, because of patchy U.S. economic data and dollar moves," ABN Amro analyst Georgette Boele said.
"If you have a consistent set of stronger data, you will get that move lower."
The dollar was up 0.3 percent versus a basket of leading currencies, while European equities also edged higher, dampening gold's appeal as an alternative investment. [FRX/]
Markets awaited more U.S. economic data, including monthly non-farm payrolls on Friday, to gauge the strength of the economy and how it would affect the Federal Reserve's interest rate policy. Higher rates would reduce demand for non-interest-paying bullion.
Investors also monitored Greece's debt situation after the country's creditors on Tuesday drafted the broad lines of an agreement to put to the leftist government in Athens, in a bid to conclude four months of acrimonious negotiations and release aid before the cash-strapped country runs out of money.
Failure to reach agreement this month could trigger a Greek default and lead to the imposition of capital controls and a potential exit from the euro zone, dealing a serious blow to Europe's supposedly irreversible single currency.
Bullion had got some support in recent sessions from the uncertainties over the Greek debt crisis as investors sought safety in the metal.
However, general sentiment towards the metal remained bearish, as shown by outflows from gold exchange-traded funds (ETF), a sign that investors are not confident of any price gains.
Holdings in the top eight gold ETFs, funds backed by physical metal, were at a five-year low as of Tuesday.
Spot platinum was up 0.1 percent at $1,106.50 an ounce. It was still trading at the cheapest to gold since January 2013, with a $90 an ounce discount to the yellow metal.
Silver fell 0.7 percent to $16.63 an ounce, while palladium lost 0.8 percent to $759.90 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by David Holmes)
