Gold rises on weak dollar but U.S. rate hike fears limit gains

Investing.com - Gold prices edged higher for the third consecutive session on Wednesday, as a weaker U.S. dollar provided support but gains remained limited amid speculation the Federal Reserve could raise interest rates as early as September.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery tacked on $5.80, or 0.49%, to trade at $1,183.40 a troy ounce during European morning hours after hitting an intraday peak of $1,184.90, the most since June 4.

Futures were likely to find support at $1,162.10, the low from June 5, and resistance at $1,195.60, the high from June 3.

A day earlier, gold prices rose $4.00, or 0.34%, to close at $1,177.60. Prices slumped to an 11-week low of $1,162.10 on June 5, amid growing expectations for a rate hike from the Federal Reserve later this year.

Expectations of higher borrowing rates going forward is considered bearish for gold, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.75% to 94.45 early on Wednesday, pressured lower by a stronger yen.

USD/JPY fell more than 1% to hit a two-week low after Bank of Japan Governor Haruhiko Kuroda said the real effective exchange rate shows the Japanese currency is "very weak".

Meanwhile, the euro pushed higher against the U.S. dollar, as soaring German Bund yields provided support.

German 10-Year bund yields rose above the psychologically-important 1%-level for the first time since September 2014 amid indications that the European Central Bank's massive stimulus program boosted growth prospects in the region and helped avert the risk of deflation.

In the U.S., the yield on 10-Year Treasurys advanced 4.9 basis points, or 2.01%, to hit 2.466%, the highest level since October 3, amid speculation that the Federal Reserve could raise rates in September.

Also on the Comex, silver futures for July delivery increased 12.8 cents, or 0.8%, to trade at $16.08 a troy ounce. Silver prices dipped 0.2 cents, or 0.01% on Tuesday to end at $15.95.

Elsewhere in metals trading, copper for July delivery jumped 2.9 cents, or 1.07%, to trade at $2.743 a pound, the most since June 3, amid speculation policymakers in China will have to introduce further stimulus measures to jumpstart the economy amid lackluster growth.

The Asian nation is the world's largest copper consumer, accounting for nearly 40% of global demand.

Meanwhile, developments surrounding talks between Greece and its international creditors remained in focus.

On Tuesday European officials dismissed economic reforms put forward by Athens, saying they did not do enough to meet creditors’ demands. Athens was expected to resume talks on a cash-for-reforms deal with its international lenders later in the day.

Greece delayed a key debt payment to the International Monetary Fund on Friday, saying it would repay the money along with other payments due this month by the end of June.