Investing.com – Gold prices rallied to a three-week high before paring some of those gains as investors assessed the implications of China’s move to devalue its currency by the most in two decades.
for December delivery on the Comex division of the New York Mercantile Exchange hit a session peak of $1,118.90 a troy ounce, the strongest level since July 20, before trading at $1,109.50 during U.S. morning hours, up $5.30, or 0.48%.
China’s central bank devalued the yuan by nearly 2% in a surprise move overnight, allowing the currency to fall to levels last seen in 2012, in an effort to make the country’s exports more competitive and boost the economy amid lackluster growth.
Figures released over the weekend showed that Chinese exports dropped 8.3% in July, their biggest fall in four months, while producer prices fell to a six-year low.
A day earlier, gold tacked on $10.00, or 0.91%, to close at $1,108.50 as traders mulled the timing of a Federal Reserve rate hike after Fed Governor Stanley Fischer said that the central bank is concerned about low inflation and won’t start to raise rates before it sees inflation returning to more normal levels.
The comments sparked uncertainty surrounding a Fed rate hike in September and prompted some investors to argue that the central bank might hold off on raising rates until December.
Gold fell to a five-and-a-half year low of $1,072.30 on July 24 amid speculation the Fed will raise interest rates in September for the first time since 2006.
Expectations of higher borrowing rates going forward is considered bearish for gold, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise.
The , which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.25% at 96.98 early Tuesday, the lowest level since July 31.
Also on the Comex, for September delivery dipped 5.7 cents, or 0.37%, to trade at $15.23 a troy ounce. Prices surged to $15.37 on Monday, a level not seen since July 14, before closing at $15.29.
Elsewhere in metals trading, for September delivery on the Comex division of the New York Mercantile Exchange plunged 6.5 cents, or 2.7%, to trade at $2.335 a pound during morning hours in New York.
On Monday, copper tumbled to $2.307, a level not seen since June 2009, before turning higher to settle at $2.400, up 6.7 cents, or 2.89%.
Copper prices have been under pressure in recent weeks amid growing concerns over the health of China’s economy.
The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.
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