Investing.com -- Gold futures rose considerably in spite of a stronger dollar, as the People's Bank of China resumed its efforts to stabilize its currency nearly a week after it fell to its lowest level in more than three years.
On the Comex division of the New York Mercantile Exchange, gold for December delivery traded between $1,113.10 and $1,122.20 a troy ounce, before settling at $1,118.80, up 6.10 or 0.55%. Last week, gold futures rose by more than 1.5% after dropping below $1,090.00 an ounce – posting one of its strongest weeks of the Summer period. The precious metal is still down by more than 2.4% over the last month as the aftershocks from a 10-day skid in mid-July, its longest losing streak in nearly two decades, continue to be felt. Since peaking above $1,200 an ounce in the middle of June, gold futures have fallen in value by more than 5%.
Gold likely gained support at $1,093, the low from August 11 and was met with resistance at $1,133.80, the high from July 20.
In Beijing, the People's Bank of China (PBOC) maintained its push to stabilize the yuan, days after its currency suffered its most tumultuous week in years. During Monday morning's daily fix, the PBOC moved its currency only 0.1% from its midpoint against the dollar, as USD/CNY rose modestly 0.06% to 6.3949. By comparison, the Chinese central bank moved the yuan nearly 2% below the midpoint of the currency pair on two consecutive days last week, as the remnibi fell to its lowest level in four years.
Previously, the PBOC set the midpoint, or central parity rate of its currency, after receiving a range of dollar-yuan prices from a host of Chinese state-owned banks. In turn, the central bank responded by adjusting the value of the yuan anywhere between 2% above or below the midpoint. Last week, however, the PBOC shifted its policy by declaring that the midpoint would instead be based off the value of the previous session's close.
China is the world's largest producer and second-largest consumer of gold behind India.
Over the weekend, the International Monetary Fund hinted that the seismic yuan reforms may bring China closer to a floating rate system, shifting away from its current managed float regime. In a staff report on key macroeconomic issues affecting Chinese economic growth, the IMF suggested that significant exchange rate flexibility could help the world's second-largest economy integrate more effectively into the global financial markets.
“We believe that China can, and should, aim for an effectively floating exchange rate regime within 2–3 years,” wrote Markus Rodlauer, IMF mission chief for China, in the report. "In this regard, the IMF noted that the new mechanism for determining the central parity of the Renminbi announced by the central bank is a welcome step as it should allow market forces to have a greater role in determining the exchange rate."
Metal traders also await the release of the Federal Open Market Committee's minutes from its July meeting for further indications from the Federal Reserve later this week on the timing of a potential interest rate hike. While the Fed is expected to raise its benchmark for short-term interest rates before the end of the year, it has not indicated if it will do so during its September or December meeting.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose more than 0.25% to an intraday high of 96.84 in U.S. afternoon trading. The dollar moved broadly higher after the National Association of Home Builders said its Housing Market Index for July rose modestly for the month, in line with analysts' expectations.
Silver for September delivery rose 0.087 or 0.57% to 15.30 an ounce.
Copper for September delivery fell 0.028 or 1.18% to 2.324 a pound.