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PRECIOUS-Gold rises as yuan fears keep safe-haven draw

Published 17/08/2015, 04:14 pm
© Reuters.  PRECIOUS-Gold rises as yuan fears keep safe-haven draw
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* Weaker China yuan may keep Fed from raising rates in Sept

* Coming up: U.S. NAHB housing market index at 1400 GMT (Updates prices)

By Manolo Serapio Jr

MANILA, Aug 17 (Reuters) - Gold edged higher on Monday as concerns persisted over a weaker yuan after China devalued its currency last week, with the uncertainty likely to burnish bullion's safe-haven appeal.

The weaker yuan could still prompt the U.S. Federal Reserve not to raise interest rates as soon as next month, as many had expected previously, despite continued signals of a strengthening U.S. economy.

"The repercussions of China's move are more deep seated than it appears and over the course of the next few weeks, gold should remain elevated on growing concerns about the state of China's health," said Howie Lee, analyst at Phillip Futures in Singapore.

Spot gold XAU= was up 0.4 percent at $1,117.80 an ounce by 0600 GMT. The metal touched a three-week peak of $1,126.31 on Thursday, helping it end a seven-week losing run.

U.S. gold for December delivery GCcv1 rose 0.4 percent to $1,117.30 an ounce.

China's devaluation of its yuan last week helped gold recover some lost ground, pulling it up from a 5-1/2-year low of $1,077 reached during a late-July rout.

Lee said there is a chance gold could rise as far as $1,150 if the Fed does not raise interest rates at its next policy meeting in September.

"We're not sure anymore whether (Fed Chair Janet) Yellen will be comfortable raising interest rates in September with what China has done. (China) is exporting deflation and she may not be too comfortable with it at this point," said Lee, who rates the probability of a rate hike next month at 50-50 against 60-40 earlier.

Minutes from the Fed's July 28-29 meeting due on Wednesday will offer vital clues about its plan to hike rates for the first time since 2006. Rebounding retail sales, solid jobs growth and rising construction all point to next month as gross domestic product stays above trend for the world's largest economy. ID:nL5N10P2UU

Mizuho Bank senior economist Vishnu Varathan said the Fed minutes may "re-sensitize markets to U.S. data and solid prints may ignite firmer U.S. dollar and knock-on softer yuan fix." A stronger dollar could weigh on gold.

Spot silver XAG= gained 0.4 percent to $15.27 an ounce after scaling a one-month high of $15.61 on Friday. Platinum XPT= rose 0.7 percent to $996.20 an ounce and palladium XPD added 0.3 percent to $617.28.

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