BU: GOLD RISES TO 3-WEEK HIGHS AS CHINA DEVALUES CURRENCY
Gold prices increased to the highest point in three weeks as the People’s Bank of China (PBoC) devalued the yuan overnight, providing a boost for the yellow-metal.
Gold for December delivery on the Comex division of the New York Mercantile Exchange was last up $2.80 or 0.3 percent to $1,106.90 percent. Earlier, the price touched $1,119.10, the highest point since June 20.
The PBoC reduced the value of the yuan by 1.9 percent against the dollar, the biggest drop since 1994. The Chinese economy has seen exports drop by 8.3 percent in July and a volatile equity market spook investors.
A cheaper currency allows Chinese producers to export their goods more cheaply.
“The PBoC’s measure could open the door to a further round of the global devaluation race between currencies, which should benefit gold as an alternative currency,” Commerzbank said. “Furthermore, in taking this step China has made it clear that it will not be tightening monetary policy as the US Federal Reserve is about to do.”
In news, Greece and its lenders reached an 85 billion euro bailout agreement on Tuesday. The 23-hour session led to a three year programme with Greek banks receiving 10 billion euros immediately.
The deal allows the Mediterranean country to repay an existing 3.2 billion euro payment to the European Central Bank due by August 20.
In today’s data, China’s new loans jumped to 1.48 trillion yuan from 1.28 trillion yuan and money supply expanded more than expected too. Out of Europe, German WPI disappointed at 0.1 percent, while the country’s ZEW economic sentiment was also worse than expected at 25.0. Eurozone’s ZEW economic sentiment was better than forecast, rising to 47.6.
Data out later includes the US small business index, non-farm productivity, unit labour costs and wholesale inventories.
Turning to wider markets, Germany’s DAX and France’s CAC-40 were down 1.9 percent and 1.4 percent respectively, while the euro was 0.5 percent stronger at $1.1072 against the dollar.
As for other precious metals, Comex Silver for September settlement was last down 10.2 cents to $15.190 per ounce. Trade has ranged from $15.065 to $15.380.
Platinum for October delivery was last down $5.0 to $984.80 per ounce, while the most actively traded palladium contract was at $612.20, up $6.00.
