PBoC Yuan Fixing Stabilizes Markets, Gold Prices Close to Six-Year Levels

Gold prices kept close to six-year highs on Tuesday after the People’s Bank of China’s latest yuan was said to stabilize markets.

Spot gold gained $ 1.72, or 0.1%, to $ 1,465.61 by 9:12 AM ET, pulling from the high within $ 1,474.99, its most expensive level since May 2013.

On the back of the United States labeling China a currency manipulator after the country allowed the yuan to fall below the psychological level of 7 per dollar on Monday, the PBoC announced overnight a stronger-than-expected fix.

“Markets have reacted to China’s currency peg by exiting secure housing positions,” ING strategist Francesco Pesole said in a note.

While recommending to watch the dollar during a speech by weaker Federal Reserve member James Bullard at 1:05 PM ET, he said he expects the fixing of “PBoC” to remain a key driver of market sentiment this week. ”

Mohamed El-Erian, chief economist at Allianz, said that while fixing the PBoC helped restore market stability on Tuesday, the action appeared to point to more “ceasefire at best, not a solution”.

Along those lines, Goldman Sachs chief economist Jan Hatzius said he no longer expects the US and China to reach a trade deal before the US presidential election in November 2020.

Trump’s decision to impose a 10% tariff on $ 300 billion of Chinese imports from September 1, ”suggests both sides in the trade conflict are taking a harder line, lowering the chances of a settlement in the near term , “Hatzius wrote in the note.

He also said that he now sees a 75% chance of a rate hike by the Fed in September, followed by a 50% chance of an additional hike in October, coming after a quarter-point drop last week. Hatzius previously predicted that the Fed would only cut twice this year.

Market confidence is much higher with a 25 basis point drop in September at full price with the odds of an additional October drop above 75%.

Lower interest rates reduce the cost of opportunities for non-yielding rods.

In other metals trading, silver futures gained 0.2% to $ 16,427 an ounce of troy as of 9:15 AM ET.

Futures in the Palladium futures rose 1.1% to $ 1,432.10 an ounce, while the sister metal plate fell 0.4% to $ 854.50.

In base metals, copper traded down 0.9% to $ 2,568./Investing.com

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