Gold gained on Tuesday as the euro jumped after China's central bank set
the yuan's daily mid-point
at its strongest since a 2005 revaluation, while a drop in bullion
prices from a record also triggered bargain hunting.
Gold could still revisit $1,250 an ounce due to
worries about the global economy, but an increase in risk appetite
following China's move could cap gains. Silver and platinum group metals
were higher, partly driven by firm base metals. Spot gold rose $6.65 to $1,238.30 an ounce in Asian
trade. Gold struck a record high around $1,264 on Monday before a sudden
drop in the euro prompted heavy selling from investors, sending the
price down to a low around $1,230.
"There's some physical buying from the retail sector
but I think there's not much. The market is consolidating after reaching
record highs," said a dealer in Hong Kong.
"This is also a good time to take profits but I
don't think gold will fall below $1,200. We may trade in a range of
$1,230 to $1,248 ahead of the FOMC meeting. If goes back to around
$1,250, we may see another record high next week," he added.
China's central bank set
the yuan's daily mid-point at 6.7980 against the dollar on Tuesday, in
the second day of trading since China pledged at the weekend to make the
yuan more flexible.
Reuters poll of analysts showed Chinese authorities will only allow up
to a 2.4 percent rise for the yuan against the dollar by the end of
2010, keeping its word that it will keep the currency basically stable.
The Federal Reserve's
two-day policy meeting begins on Tuesday and some dealers are
increasingly convinced the U.S. central bank will leave its policy rate
target in the zero to 0.25 percent range until the middle of 2011.
U.S. gold futures for
August delivery fell $1.5 an ounce to $1,239.2, after hitting a record
has rallied to records as investors turned to the metal on worries the
euro debt crisis would spread, the U.S. economy may be slowing and after
China's move to make the yuan exchange rate flexible put pressure on
the short-term the gold price may be in for some consolidation," said
Fortis Bank Nederland in a report.
"But rather like a long-distance runner who has been
sitting in an armchair for years, the gold price needs to pause for
breath before the next small rally higher."
The euro and the Australian dollar hit their highs
on the day on Tuesday after China's central bank set the yuan's
mid-point higher, while the Nikkei slipped after a bounce to a one-month
high the previous day.
world's largest gold-backed exchange-traded fund, SPDR Gold
Trust said its holdings were unchanged at a record
high at 1,307.963 tonnes.
fell 0.8 percent toward $77 on Tuesday on speculation that a gradual
appreciation of the yuan would have a limited impact on China's
petroleum imports in the short term.