London: Gold steadied on Friday as the dollar retreated and investors weighed the impact of China’s currency intervention on the timing for the first US interest rate increase in nearly a decade.
Bullion was set to end a seven-week losing streak after China’s yuan devaluation earlier this week increased uncertainty over the global economy, and pushed investors into assets perceived as safer such as gold.
Spot gold was up 0.4 per cent at $1,118.54 an ounce by 1200 GMT after hitting $1,126.31 on Thursday, its highest since July 20. Thursday’s drop ended gold’s five-day rise, its longest rally since May.
US gold for December delivery was up 0.2 per cent at $1,118.10 an ounce.
“The PBOC (People’s Bank of China) participating in this devaluation war was seen as positive for gold,” Commerzbank analyst Eugen Weinberg said.
“People’s perception that this devaluation could impact the timing of the rate hike in the US, therefore pushing the dollar lower, is also seen as a gold-supportive factor.” Volatile markets were soothed as the yuan steadied after China’s central bank said there was no reason for the currency to fall further given the country’s strong economic fundamentals.
“A further decline in volatility may reverse some of bullion’s recent ‘safe-haven’ inspired gains,” said HSBC in a note.
Still, the precious metal has gained nearly 2 per cent in the week so far, after a seven-week slide that was its longest retreat since 1999.
As fears eased that China was looking at depreciating its currency further, a rebound in US retail sales in July renewed expectations that the Federal Reserve could raise interest rates soon.
Gold “will be looking for support around $1,110, while $1,120-$1,125 should cap any moves higher unless we see further yuan depreciation,” MKS Group said in a note.
Asian buyers of physical gold were sidelined this week as prices recovered, steadying premiums in top consumers China and India.
China’s gold reserves rose to 53.93 million ounces by the end of July, up from 53.32 million at end-June, the central bank said on Friday. The data was released following a June adjustment that was the first in more than six years.
China’s gold demand this year is expected to at least hold steady with last year at just under 1,000 tonnes and will not likely be dented by the currency devaluation, the World Gold Council said.
Spot palladium rose 0.8 per cent to $621.15 an ounce after touching a two-week high on Thursday. Platinum was flat at $991.24 an ounce and silver gained 0.3 per cent to $15.46.
