Gold prices reverse losses, spurred by yuan's devaluation
Gold prices turned higher Tuesday, reversing a drop that came after the surprise decision by China to devalue its currency. Gold prices earlier had slipped below the threshold of $1,100 an ounce after The People's Bank of China overnight allowed the yuan to devalue by 1.9%, in an effort to boost flagging exports, spur growth in the world's second-largest economy and allow the currency to be driven more by market forces. Prices of the yellow metal had climbed briefly the previous day, helped by a weaker dollar.
China accounts for nearly one-third of global gold demand. As the country is one of the world's biggest importers of the metal, a weaker yuan will make gold more expensive for domestic buyers. "If anything, it may worsen the gold demand," Barnabas Gan, economist with OCBC Bank in Singapore, said of the Chinese decision. A tumble in the price of gold to a five-year low in late July had sparked more retail buying, which had been lackluster for months amid a corruption crackdown by Beijing. Gold's late-July slump was triggered by selling in Asia, following a disclosure by China's central bank that its gold reserves were far below market expectations. That data showed China having the fifth-largest official gold reserves. Among other precious metals, the price of silver SIU5, -0.41% turned higher by 2 cents, or 0.2%, to $15.31 per ounce, while platinum PLU5, +0.75% rose $5.60, or 0.6%, to $995.40 an ounce.