GOLD PRICES fell in London on Monday, coming within $5 per ounce last week's 4-month lows as world stock markets rose – but commodities dropped with major-government bond prices – following the overnight deal between Athens and its Eurozone creditors over extending Greece's financial bail-out.

Shanghai's main stock index closed almost 3% higher, continuing China's recovery from the last month's 30% sell off after regulators banned large investors from selling their shares.

With the European Central Bank meeting to set monetary policy on Thursday this week, the Euro meantime dropped almost 2 cents on the FX market, dipping beneath $1.10 – an 11-year low when first hit at the start of this latest Greek crisis in January.

That helped the gold price in Euros recover an early 0.7% drop near last week's new 5-month lows, rallying back to €1044 per ounce.

"Gold dropped in knee-jerk fashion after the Euro summit reached a deal on Greece this morning," says a bullion note from Swiss bank and London market maker UBS.

"Given the relative lack of significant safe-haven flows to begin with, the downside should be contained."

What's more, UBS adds, bearish speculators betting against gold prices "[are] likely going to be constrained by the fact that gold short positioning is at all-time highs."

Latest data show hedge funds and other non-industry players in US gold futures and options growing their bearish bets as a group by 12% last week to a new all-time high , some 3.6 times the size of the last two decades' average.

Net net, however, speculators remained bullish overall, but by the smallest margin since the gold price crash of 2013.

"Clearly," says a note from the commodity analysts at Commerzbank, "speculative market participants are more convinced than ever that Greece will be 'rescued'.

"In our opinion, the growing pessimism displayed by money managers will prevent precious metal prices from making any kind of noticeable recovery in the near future."

Looking longer-term, "Gold's price has remained extraordinarily stable for 2 years now," says US investment bank and London market maker Morgan Stanley, "trading in a tight $1100-1300 per ounce band.

While gold prices have been "buoyed perhaps by Euro-centric anxiety (Greece, Russia)," Morgan Stanley says, the metal's firm range has "also largely [been] ignoring the steady lift of the US Dollar" on the currency market.

More than 6.5 years after the Federal Reserve first cut overnight Dollar interest rates to 0%, US Fed chair Janet Yellen – who testifies on monetary policy later this week to Congress – said Friday she expects "it will be appropriate at some point later this year to take the first step to raise the federal funds rate and thus begin normalizing monetary policy.

"But I want to emphasize that the course of the economy and inflation remains highly uncertain, and unanticipated developments could delay or accelerate this first step."

Last weekend's continued talks between Iran and the UN 's five permanent members plus Germany could "suppress crude prices, adding to deflationary pressures in many economies," notes Mitsubishi analyst Jonathan Butler in his weekly report on Monday.

But while "removing the need for an inflation hedge," any deal which further dents crude oil "would also risk inflation [being] too low for the US to raise interest rates any time soon...relatively benign for gold."