Spot gold rises as U.S. dollar index weakens

By Chris Prentice and Jan Harvey

NEW YORK/LONDON (Reuters) - Gold rose past chart resistance on Tuesday, recouping most of the previous session's losses in choppy, currency-driven trade after the U.S. dollar turned lower and bolstered bullion's appeal.

Global stocks gained as upbeat corporate earnings offset rising worries about a possible Greek default. [MKTS/GLOB]

Spot gold was up 0.5 percent to $1,202.90 an ounce by 1:56 p.m. EDT (1756 GMT) after surpassing resistance at $1,200 to touch a session high of $1,204. U.S. gold futures for June delivery settled up $9.40 an ounce, or 0.8 percent, at $1,203.10.

"We're looking at currency and bonds today. We saw the dollar index start off really strong, and now has backed off and turned negative," said Phillip Streible, senior commodities broker at RJO Futures in Chicago.

The greenback reversed earlier gains against a basket of major currencies. A stronger U.S. dollar makes greenback-traded commodities more expensive to holders of other currencies.

Gold also gained support from trader-positioning as details emerged of a European Central Bank proposal to increase the insurance it would demand in return for emergency funding to Greek banks. Those details pressured the euro earlier in the session. [FRX/]

Gold prices have been under pressure this year from expectations that the Federal Reserve is preparing to increase interest rates for the first time in nearly a decade.

That would boost the dollar and reduce gold's appeal. Until there is further clarity on the outlook for U.S. rates, gold is likely to struggle for direction, analysts said.

"Overall uncertainty on the timing and pace of Fed tightening adds to investors' reluctance to put on sizeable positions at this point," UBS said in a note on Tuesday.

Physical demand in China, the second largest gold consumer, was lacklustre overnight, traders said, with precious metals house MKS reporting "low turnover and modest price action" during Asian trading hours.

Traders were also watching physical demand in top consumer India, said to be strong during the Akshaya Tritiya festival, considered one of the most auspicious days to buy gold.

Supply of the metal into India rose sharply in the build-up to the festival.

Silver was up 0.5 percent at $15.98 an ounce, as platinum eased 0.05 percent at $1,144 and palladium climbed 0.08 percent to $770.12.

(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Alison Williams, Louise Heavens, Jeffrey Benkoe)