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MTECHTIPS:-Gold pares some of its gains as PBOC scrambles to stabilize falling yuan

MTECHTIPS:-Gold pares some of its gains as PBOC scrambles to stabilize falling yuan

Gold futures erased some of their gains from Wednesday’s surge, as investors locked into profits earned in the prior session and the People’s Bank of China soothed markets by insisting there is no basis for further devaluation of the yuan. On the Comex division of the New York Mercantile Exchange, gold for December delivery traded in a broad range between 1,113.10 and 1,126.10 an ounce, before settling at 1,115.60, down 8.00 or 0.71%. A session earlier gold futures shot up by more than 1.45%, enjoying its strongest one-day move in more than a month, to return to levels not seen since late-July. At one point last month, the precious metal suffered a 10-day losing streak to fall to its lowest level in five and a half years. Gold likely gained support at $1,093.30, the low from August 11 and was met with resistance at $1,133.80, the high from July 20. Despite further efforts from the PBOC to stabilize its falling currency, USD/CNY remained at near four-year highs at 6.40 after the Chinese central bank cut the Yuan Reference Rate by 1.1%. During a press conference in Beijing, PBOC deputy governor Yi Gang said the central bank is hoping to accelerate foreign exchange market development by improving its yuan pricing mechanism both offshore and on the China mainland. In addition, Gang emphasized that the PBOC has ample foreign exchange reserves to provide strong support for significant depreciations in the currency. Gang also went to great lengths to dismiss reports that the PBOC could depreciate the yuan by as much as 10% on a long-term basis. China is the world’s largest producer of gold and the second-largest consumer behind India.

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