Gold steadied away from a three-week high on Friday as China calmed jittery global markets, with upbeat US retail sales refreshing expectations for a near-term increase in US interest rates. But bullion was still set to end a seven-week losing streak after China's yuan devaluation earlier this week pushed investors out of risky assets and into those deemed to be so-called safe havens.
Volatile markets were soothed as the yuan held steady after China's central bank said there was no reason for the currency to fall further given the country's strong economic fundamentals. "A further decline in volatility may reverse some of bullion's recent 'safe-haven' inspired gains," said HSBC analyst James Steel. Spot gold was flat at $1,115.20 an ounce by 0628 GMT, after peaking at $1,126.31 on Thursday, its highest since July 20. Thursday's drop ended gold's five-day rise, its longest rally since May. Still, the precious metal has gained nearly 2 percent for the week so far, after a seven-week slide that was its longest retreat since 1999. US gold for December delivery was similarly unchanged at $1,115.20 an ounce.
As fears eased that China was looking at further depreciating its currency after Tuesday's shock devaluation, a rebound in US retail sales in July renewed hopes that the Federal Reserve could raise interest rates soon. The yuan devaluation had raised speculation that the Fed could delay the rate hike, which many analysts had predicted would happen as early as next month. Gold "will be looking for support around $1,110, while$1,120-$1,125 should cap any moves higher unless we see further yuan depreciation," MKS Group trader Samuel Laughlin said in a note. Asian buyers of physical gold were sidelined this week as prices recovered, steadying premiums in top consumers China and India.
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