Analysts: Gold inability to respond to softer dollar is disappointing; Weak performance ahead

"Gold's inability to rally in response to the weaker dollar this past week is a disappointment and reinforced the bearish trend that's been in place since the mid-May rally above $1,220," said Ken Morrison, trader and editor Morrison On The Markets. 

Gold traders will now monitor development of debt negotiations between Greece and her creditors. Going back to the drachma would be bullish for gold, analysts say.

The U.S. dollar index surged on Friday, after a report revealing strong U.S. job growth in May, but closed lower on the week. Gold prices were also pressured.

Looking ahead to next week, the gold price outlook is generally weak, says Kitco News.

211, or 60% of analysts are bearish on gold next week; 106 or 30% are bull on prices next week and 33 voters or 10% are neutral, according to the latest Kitco Wall Street Versus Main Street Weekly Gold Survey. This week, 350 people participated in Kitco’s poll.

Gold traders will now monitor developments out of Greece this week, with some analysts suggesting the country is getting closer to Grexit, as Athens and her main creditors are still far from reaching a deal.

The Greek wild card is a potential bullish element on the table for gold, says Ira Epstein, managing director at the Ira Epstein division of Linn & Associates.

"If there is no Greek calamity, I would expect the gold market falls [next week]. But, if they decide to go back to the drachma that would be bullish for gold. That is the one element that could provide support to gold prices," he said.

Sean Lusk, director of the commercial hedging division at Walsh Trading also thinks that Greek drama will be in the center of traders' attention this week adding that "whether though that ignites some safe haven covering remains to be seen."

Epstein expects gold to remain in a weak trend near term in case no further crisis emerges for Athens. He saw potential for a short-term bounce in gold, with resistance at the $1,185-$1,200 area. However, "that would be a sell zone," Epstein said. He pegged a downside target at $1,120 per ounce.

Gold traders will now await the June 16-17 Federal Open Market Committee meeting, which will be followed by a press conference.

Strategists consider that the precious metals market could shift into a neutral mode ahead of the key Fed meeting in mid June.

"I look for the gold market to consolidate into the FOMC on June 16-17, however retail sales next week and housing data the week after could alter gold's direction. It will be interesting to see if gold can hold November lows or if this recent dip will ignite physical buying in Asia," said Lusk.

Morrison also considers that "the focus will increasingly shift toward the mid-June FOMC meeting and the debate will continue on the timing of the first rate hike since 2006. Support for gold is at $1,150'ish and first resistance is around $1,185'ish."