Gold News & Info

Source: Bill Musgrave, American Gold Exchange

Austin— Gold surged another 1.4%, closing at a three-week high near $1,124, as China's deepening devaluation of the yuan triggered fears of a currency war, driving investors into safe havens. The metal has risen for five straight sessions for its longest winning streak in nearly three months.

China devalued its currency for a second day, forcing the yuan to a new four-year low against the dollar, as it seeks to boost growth by making exports cheaper. The moves come after a recent string of poor economic data�including lower retail sales, slower factory output, and stumbling exports�that point to the slowest growth in more than two decades.

Most analysts view the yuan's devaluation as an attempt to grab an advantage in exports, and many think it is only the beginning. Deutsche Bank and Reuters anticipate China will devalue by as much as 10% overall, more than five times yesterday's 1.9% cut, itself the biggest one-day drop in more than 20 years.

If other nations follow China's lead, cheapening their currencies to cheapen their exports, the resulting currency war could fuel global disinflation, something the Fed has already cited as a reason for caution in tightening U.S. monetary policy. In addition, rising rates would further strengthen an already-strong dollar, making U.S companies less competitive overseas and cutting into U.S. GDP.

The dollar fell around 1% as traders speculate that the Fed will ">now be less likely to raise rates in the near term. A falling dollar supports gold and other commodities denominated in it for international trade by making them less expensive overseas. Treasurys followed gold higher for a second day on safe-haven demand, with 10-year yields falling to two-month lows.

The other precious metals also finished strongly higher. Silver gained 1.4% while platinum and palladium jumped 0.8% and 1.5%, respectively.

At the Comex close: December gold surged $15.90 to $1,123.60; September silver rose 21 cents to $15.50; October platinum added $7.60 to $1,000; and October palladium picked up $9.20 to $606.40.