Gold futures rally $10 as dollar weakens

Investing.com - Gold prices rose sharply on Tuesday, as a broadly weaker U.S. dollar boosted the appeal of the precious metal, while investors eyed gains in global bond yields.

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery jumped $10.30, or 0.87%, to trade at $1,193.30 a troy ounce during U.S. morning hours after hitting a session high of $1,196.00.

A day earlier, gold dropped $5.90, or 0.5%, to close at $1,183.00. Prices were likely to find support at $1,168.40, the low from May 1, and resistance at $1,199.30, the high from May 5.

Also on the Comex, silver futures for July delivery tacked on 8.1 cents, or 0.5%, to trade at $16.39 a troy ounce. On Monday, silver slumped 15.1 cents, or 0.92%, to end at $16.31.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.66% to 94.48, re-approaching last week’s two-month trough of 93.96.

Dollar weakness usually benefits gold, as it boosts the metal's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.

A renewed selloff in global government bond prices dominated market sentiment. Yields on German 10-Year Bunds surged 10.7 basis points, or 17.86%, to hit 0.706%, after rising to an intraday high of 0.740%.

The 10-year German government bond yield hit an all-time low of 0.048% on April 17, before moving higher as deflation fears eased amid recovering oil prices and following the introduction of the European Central Bank's massive quantitative easing program.

Meanwhile, in the U.S., the yield on 10-Year Treasurys advanced 4.8 basis points, or 2.11%, to hit 2.320%, the highest level since December 8.

Concerns over Greece remained in focus after Athens repaid a €770 million loan installment to the International Monetary Fund early Tuesday, easing concerns that it was on the verge of default.

The debt-strapped nation is scrambling to reach an agreement with its international creditors on a package of economic reforms in order to access fresh bailout funds and avert a liquidity crunch.

Market players looked ahead to Wednesday's U.S. retail sales report for April, for fresh indications on the strength of the economy and the timing of a U.S. rate increase.

Recent economic reports have indicated that the economy has slowed since the start of the year, prompting many investors to push back expectations on the timing of an initial rate hike by the Fed.

Elsewhere in metals trading, copper for July delivery rose 3.2 cents, or 1.1%, to trade at $2.935 a pound.

Market participants looked ahead to a raft of Chinese economic data due on Wednesday for further indications on the strength of the economy and the future path of monetary policy. The Asian nation will release data on industrial production, retail sales and fixed-asset investment for April.

Recent economic data from China has indicated that the recovery remains fragile and may require further monetary stimulus.

On Sunday, the People's Bank of China cut its benchmark interest rate by a quarter percentage point to 5.10% from 5.35%, in order to spur economic activity and boost growth.

It was the third rate cut since November, indicating that Beijing is becoming more aggressive in supporting the economy as its momentum slows and deflation risks rise.

China is the world’s largest copper consumer, accounting for almost 40% of world consumption.