Gold Ends Higher After China Currency Move

(RTTNews) - Gold futures ended higher for a fourth straight session on Tuesday, on the back of a move by China's central bank to devalue the yuan by a near 2 percent, in emergency measures to shore up the slowing Chinese economy.

China devalued yuan by the most in two decades to cushion its exports as the economy shows no solid signs of revival after the volatility in the stock market. China's central bank set the value of yuan at 6.2298 a dollar, prompting the biggest one-day loss since 1994, when it unified official rate with market rates

As a result, gold and other commodities have become more expensive for Chinese buyers.

The move has also diluted the chances for a U.S. rate hike in September, as the Federal Reserve would not want to risk exports by strengthening the dollar much more.

In other economic news, labor productivity in the U.S. rebounded in the second quarter, although the pace of growth was short of expectations, a report from the Labor Department showed Tuesday.

Meanwhile, wholesale inventories in the U.S. rose more than expected in June, reflecting a notable increase in inventories of non-durable goods, a Commerce Department report showed Tuesday.

Gold for December delivery, the most actively traded contract, added $3.60 or 0.3 percent, to settle at $1,107.70 an ounce, on the Comex division of the New York Mercantile Exchange on Tuesday.

Gold for December delivery scaled an intraday high of $1,119.10 and a low of $1,093.30 an ounce.

On Tuesday, gold prices for December delivery gained $10.00 or 0.9 percent, to settle at $1,104.10 an ounce, after some dovish comments from a top Federal Reserve official that suggested a delay in the Fed's rate hike.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, moved slightly higher to 667.69 tons on Tuesday from its previous close of 667.59 tons on Monday.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 97.30 on Tuesday, up from its previous close of 97.19 in late North American trade on Tuesday. The dollar scaled a high of 97.59 intraday and a low of 96.88.

The euro trended higher against the dollar at $1.1034 on Tuesday, as compared to its previous close of $1.1019 in North American trade late Monday. The euro scaled a high of $1.1090 intraday and a low of $1.0961.

On the economic front, labor productivity in the U.S. rebounded with productivity climbing 1.3 percent in the second quarter following a revised 1.1 percent decrease in the first quarter. Economists expected productivity to jump by 1.6 percent compared to the 3.1 percent drop reported for the previous quarter.

A Commerce Department report on Tuesday showed wholesale inventories in the U.S. rose by 0.9 percent in June following a revised 0.6 percent increase in May. Economists expected inventories to rise by 0.4 percent.

German economic confidence deteriorated sharply to a nine-month low in August, data from the Mannheim-based Centre for European Economic Research or ZEW showed Tuesday. The economic confidence index dropped unexpectedly by 4.7 points to 25 in August, the lowest score since November 2014. It was expected to rise to 31.9.

China devalued yuan by the most in two decades to cushion its exports as the economy shows no solid signs of revival after the volatility in the stock market. The bank set the value of yuan at 6.2298 a dollar, 1.9 percent lower than Monday's official fixing rate. This was the biggest one-day loss since 1994, when it unified official rate with market rates. The Chinese currency seldom fluctuates over the range.

Greece reached an agreement with its creditors over the terms of the third bailout which would help nation stay afloat. After intensive talks, external creditors namely the European Central Bank, the European Commission, the International Monetary Fund and the European Stability Mechanism finally wrapped up talks early Tuesday sealing a deal. This would likely unlock around EUR 86 billion loans for Greece. The agreement has to be passed by the Greek parliament ahead of the meeting of Eurozone finance ministers on Friday. It would help Athens to repay EUR 3.2 billion debt to the ECB, due on August 20.