Gold Price Jumps as China Debt-Market Rule Sinks Stocks, Yuan

The gold price rose sharply Tuesday lunchtime in London, touching $1219 per ounce as Western stock markets fell hard following a 5% plunge in Shanghai, spurred by a change in China’s debt market.
Major Western government debt prices rose, pushing interest rates lower, as weaker Eurozone debt fell.
China’s main gold contract closed Shanghai trade 1.4% higher in Yuan terms on solid volumes. But it had earlier slipped to a slight discount against Dollar spot prices as the Chinese currency extended its fastest drop since 2008 to a second day.
“After sitting at [premiums] around $2.50 to $3.00 yesterday,” says a note on Asian trade from Swiss refining and finance group MKS, “buyers were happy to scoop up metal here, which kept the spot gold buoyant above $1200.”
Local traders attributed the Yuan’s sharp decline – down to its lowest level vs. the Dollar since July – to “a late reaction to Monday’s [weak] trade data,” MKS adds, “as well as an expectation of a near term cut” to the required reserve ratio of Chinese banking deposits against loans, meaning looser of monetary policy.

This post was published at FinancialSense on 12/09/2014.