Gold inches lower as China economy concerns ease

Otmane El Rhazi from The Bullion Desk.

The gold price inched lower on Thursday morning as concerns over China’s economy eased.

Spot gold was last at $1,117.2/1,117.5 per ounce, down $7 on Wednesday’s close. Still, the yellow metal is holding not far off its three-week high as the three-day devaluation of the Chinese yuan is continuing to lend support. Trade has ranged from $1,117.2 to $1,126.8 so far.

The People’s Bank of China held a press conference today saying there is no basis for a further depreciation in the yuan and that it will keep the currency stable.

Prior to that, the PBoC cut the reference rate for its currency for the third straight day today by 1.1 percent. This followed Wednesday’s cut of 1.6 percent and Tuesday’s 1.86 percent drop. The yuan was last at 6.4522.

The markets have stabilized following the PBoC comments with Asian and European stocks rebounding today from losses earlier in the week.

“If fears about China’s currency stance are fading then the market may see the Fed as likely to remain focused on September, which in turn could see the dollar turn higher again,” William Adams, FastMarkets head of research, said.

“That said, it is possible that the rebound in gold is being driven by concerns that China’s move may be the first crack in the dam that leads to a currency war, especially amongst emerging market economies. If investors are of that view then perhaps they are putting a bit more gold into their portfolios again, with gold once again adopting its non-fiat currency role again,” Adams added.

In today’s data, the German final CPI came in as expected, rising 0.2 percent, as did the French CPI, with its forecast 0.4 percent decline. US data scheduled for release later today includes retail sales, initial weekly jobless claims, import prices, business inventories and natural gas storage.

Meanwhile, the World Gold Council (WGC) reported today that global gold demand in the second quarter plunged by 12 percent year-on-year to a six-year low of 914.9 tonnes.

In the other precious metals, silver was down 20 cents at $15.34/15.39. Platinum at $990/995 dropped $7 and palladium at $614/619 was down $9.

(Editing by Martin Hayes)

 

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