Gold moved higher on Tuesday morning, continuing to gain from the implications of China’s recent currency devaluation, although attention is switching to tomorrow’s release of the Federal Open Market Committee minutes.
The spot gold price was last at $1,120.5/1,120.8 per ounce, up $3.50 on the previous close. Trade has ranged from $1,116.7 to $1,120.7 so far.
“For now, we feel the gold price is being underpinned by concerns that the Chinese devaluation may be the thin end of the wedge,” William Adams, FastMarkets head of research said.
The People’s Bank of China has made only slight adjustments to its daily yuan/dollar guidance rate so far this week. On Tuesday morning, the PBoC set its daily guidance rate almost flat at 6.3966 yuan against the dollar, relative to 6.3969 Monday.
This is compared to last week when its devaluation of 4.56 percent over three days sent global financial markets reeling.
“It seems the market is happy to wait for the US CPI and Fed minutes to gain further directional clarity, and we feel that we are likely to see range-bound trade in the meantime between $1,110-1,125,” MKS said in a note.
Minutes from the Fed’s July 28-29 meeting will be released on Wednesday, which investors will scrutinize for further signals as to when an interest rate rise will come into effect.
Still, market participants said that the minutes are for a meeting held before the Chinese yuan devaluation – “the market is likely to take that into account when it deciphers the minutes,” Adams, noted.
The selling pressure on gold ETFs appears to be abating – they saw no further outflows last week for the first time since the end of June, broker Commerzbank noted. In July, gold ETFs had registered their most pronounced monthly outflows since December 2013, it added.
Today’s data also includes housing starts and building permits from the US.
Data out overnight showed a mixed picture on housing in China. New home prices fell an average of 3.7 percent in July from a year earlier, but this was less of a decline than the 4.9 percent seen in June, or the peak of 6.1 percent seen in March and April. But, new home prices climbed in 31 out of the 70 cities monitored, which was up from 27 previously, they dropped in 29 and were flat in 10.
In the other precious metals, silver was little changed at $15.22/15.27. Platinum at $994/999 edged $1 lower and palladium at $602/607 fell $12.
(Editing by Martin Hayes)
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