Copper Still Falling While Gold Is Flat

Gold is slightly down in the Asian session but showing no distinct trend. The shiny metal is trading at 1117.40 while silver dipped 68 points to 15.23 remaining near the top of its range. Platinum is flat at 998.70. Gold prices are trading higher today by 0.3 percent trading at $1117 per ounce as perceived risk around the devaluation of the yuan by the PBOC continues to prompt safe-haven buying. The weaker yuan could still prompt the US Federal Reserve not to raise interest rates as soon as next month, as many had expected previously, despite continued signals of a strengthening US economy.

US markets closed higher as the Chinese currency steadied and home builders’ index for August beat expectations. European stocks ended a choppy session in mixed territory after a duo of US data sent conflicting signals about the strength of the country’s economy.

Gold rallied to its highest since mid-July last week after Beijing’s mini-devaluation of the yuan, as analysts speculated that a weakening Chinese currency could prompt the Federal Reserve to postpone an expected rise in U.S. interest rates.

Expectations for a rise in U.S. rates this year, which would lift the opportunity cost of holding gold while boosting the U.S. dollar, pushed the metal to a 5-1/2-year low of $1,077 last month.

A rate increase will be dependent on the strength of U.S. data. The dollar briefly retreated and gold strengthened after a report on Monday showed manufacturing activity in New York State plunged in August to its weakest since 2009.

“The likelihood of a September hike has dropped to roughly 40 percent from almost 50 percent in the morning,” Commerzbank analyst Carsten Fritsch said. “We expect gold to remain capped before the first rate hike, which we expect for September. Not too far after the first rate hike, gold should start to rise.”

Minutes from the Fed’s July 28-29 meeting to be released on Wednesday will offer clues about its plan to boost rates for the first time since 2006.

Copper continued to fall touching 2.319 in the Asian session.  Copper prices are trading lower by 0.7 percent as funds on Comex continued to increase short exposure in the red metal. Also, strength in the DX acted as a negative factor. However, China has been pushing local governments out of shadow banking and into the sunlight with a 2.6 trillion yuan ($407 billion) bond program in an effort to boost the economy.

Bloomberg reported that copper declined for a fourth day amid concern a slowing economy in China will hurt demand in the world’s biggest consumer and as a strong dollar made metals less attractive as an asset class.

China’s economy is growing more slowly than official data suggest, a Bloomberg survey shows, helping explain why policy makers have stepped up stimulus and devalued the yuan to boost exports. The economy expanded 6.3 percent in the first half, compared to the officially reported 7 percent, according to the median estimate of economists surveyed last week. The London Metal Exchange Index of six metals fell to a six-year low on Monday and aluminum had its lowest close since July 2009.