Gold firmer Monday as dollar index declines

Gold prices climbed on Monday on some short covering in the futures market and some bargain hunting in the cash, says Kitco News. Prices had dropped to a 2.5-month low last Friday. Meanwhile, the dollar index was lower, as investors locked in profits after a recent rally spurred by Friday's jobs report.

August Comex gold was last up $5.20 at $1,173.30 an ounce. July Comex silver was last up $0.036 at $16.02 an ounce.

The U.S. dollar index has declined in a subdued trade dropping 0.52% to 95.92, down from highs of 96.95 hit on Friday.

Earlier, Bloomberg cited an unnamed French official who referred to U.S. President Barack Obama as saying that a strong dollar was a problem. The report came after a group of French reporters met President Francois Hollande on Monday ahead of the second day of the G7 summit.

The White House denied the report, however investors are now cautious as U.S. policy makers, including from the Federal Reserve, have in the past few months expressed worries about a strong currency impacting growth and exports.

In overnight news, there was another downbeat economic report which came out from China on Monday. The country’s overall exports were down 2.5% in May, year-on-year, while imports were down 17.6% during the same period. The report helped to put some selling pressure into the crude oil market, as well as copper market, as the Asian nation is the world’s largest importer of raw commodities.

In Europe, negotiations between Greece and its creditors continue with Athens awaiting their response to its draft proposal on Greece’s debt restructuring. June 30 is now seen as the latest deadline for a deal to be reached. This situation is a classic “kick the can down the road” scenario that appears to be delaying the obvious: a payment default by Greece, said Kitco News analyst.

The Paris-based OECD think tank said its leading indicators showed that major economies including the U.S., Canada, China and Brazil are still struggling.