Dollar Weakens on Growing Fears of Fed Delay

Recently, it has suffered the most challenging losses since 1999.

“Once the uncertainty about the Fed’s course starts to fade, the price of gold should rise”. Monday saw spot gold briefly hit a high above 1108 before paring some of those gains by the afternoon.

China’s devaluation of the yuan should not be seen as it embarking on a devaluation trend, the central bank’s chief economist, Massachusetts Jun, wrote in the official People’s Daily on Wednesday. Yellen’s preference for “sooner-but-slower” rate hikes indicated that the Fed was moving toward normalization.

Spot gold was up 1 percent at $1,103 an ounce at 3:27 p.m. EDT (1927 GMT), while U.S. gold futures for December delivery settled up 0.9 percent at $1,104.10 an ounce. The problem is, at closer inspection, each proves elusive.

A weaker US currency makes dollar-denominated gold cheaper for foreign buyers, while the fall in returns from US bonds is seen as positive for the metal, which pays no interest. The benchmark 10-year note yield slipped to 2.045 percent, compared with its US close of 2.139 percent.

Gold was part of the rout in commodities that accelerated in June and July.

Gold fell for a seventh week in a row last week, its longest such retreat since 1999, having struggled to pull away from a 5-1/2-year trough reached in July.

The idea that a stronger dollar is negative for gold became conventional wisdom in the 1980s and 1990s.

The 2% cut by the national lender on Tuesday sent shockwaves through the global markets.

That’s not the case today.

The central bank said last week that the economy may face headwinds in coming months due to its reform efforts, and it warned that monetary policy was being blunted by a lack of new growth drivers and lukewarm appetite for new investment.

“In spite of relatively disappointing response from physical markets thus far”, UBS goes on, pointing to gold’s major consumer markets in Asia, “we expect an improvement in this market segment and lead a recovery further out, especially as seasonality kicks in”.

“China s cheapening of its currency opened a messy can of worms for markets and suggested the global economy may be worse off than previously thought”, Manimbo said.

Gold traders have been anticipating an interest-rate hike for September, and Fischer’s remarks to Bloomberg TV this morning delivered a shot in the arm to gold and other precious metals, including silver.