China Shakes Up Metals – Gold Up On Safe Haven Moves

Gold prices rose for a fifth session in a row on Wednesday, hitting a fresh three-week high as the dollar and global equities slid on concerns over China’s devaluation of its currency. Gold gave back a bit of yesterday’s gains as traders booked profits after gold rallied over the past two days. Gold is trading at 1121.20 falling $2.20 in the Asian session. Silver is down 141 points at 15.335 remaining near the top of its trading range, while platinum fell the hardest giving up $3.60 to 997.60 after breaking above the resistance level at $1000 on Wednesday.

Asian markets slumped feeling the aftershocks of China’s surprise devaluation of the yuan, which hit US equities and pushed down already weak emerging currencies. US stocks dropped yesterday after a move by China’s government to devalue its currency set off a sell-off in global financial markets, as investors worried about the health of the world’s second-largest economy.

Gold rose to a three-week high as global stocks fell, and investors assessed the impact of China’s nearly 2 percent devaluation of its currency and move to prop up its economy. Beijing allowed the yuan to fall to its lowest level in nearly three years after a run of poor economic data. Economists and U.S. Federal Reserve watchers said China’s currency devaluation is unlikely to distract the Fed from a domestic economy that appears increasingly ready for higher interest rates. Investors have cut their exposure to non-interest-bearing bullion and raised their bets on the dollar on expectations that the Fed would lift rates this year for the first time since 2006.

Copper prices recovered a bit on Wednesday as traders bought up the cheap metal. On Thursday morning copper gave back some of its gains falling 13 points to 2.334. Copper and aluminum hit six-year lows on Tuesday after China devalued its currency, fuelling worries about a glut of aluminum and boosting the cost of commodities for the world’s top metals consumer.

The currency move unleashed a wave of speculative selling across the industrial metals complex on the London Metal Exchange, which has shed about 16 percent so far this year. It reversed a rally in the previous session as bears got the upper hand again. The metal used in transport and packaging has been pressured by heavy exports from China and the devaluation has the potential to increase the viability of further shipments, adding to oversupply. China devalued its currency after a run of poor economic data, a move it billed as a free-market reform but which some suspect could be the beginning of a longer slide in the exchange rate. Adding to the gloom was a survey showing the mood among analysts and investors in Europe’s largest economy Germany worsened more than expected in August.