A CHINESE METALS ANALYST says this weekend's news that China will allow "greater flexibility" in its Yuan exchange rate "will benefit" the Gold Price as the currency gains in value against the Dollar.
"I think the impact [of China's move] will in the short term be neutral for the Gold Price," said Wallace Ng of Fortis Nederland Bank to Bloomberg earlier.
"But in the longer term I think that will benefit the Gold Price, because it means the purchasing power of the people in China will be bigger on gold."
Chinese households are now the world's second largest source of private gold demand, very nearly matching Indian household demand in 2009 by buying 427 tonnes in total.
"By making imported gold cheaper in local terms, [Yuan] appreciation could fuel increased Chinese imports," agrees Edel Tully, precious metals strategist at Swiss banking giant UBS in London.
Estimates of the Yuan's current undervaluation against the Dollar range from zero to 30%, says today's Commodities Daily report from South African bank Standard Bank's London analysts.
"If it was one big 20% revaluation, it would be quite a snag," says Geoff Clear, head of Asian commodities at Australia & New Zealand Banking Group, speaking to Bloomberg.
"But I think [the rise in the Yuan] is going to be a gradual thing, and the market will adjust."
Looking at China's fundamental demand for base metals and other commodities, "From an infrastructure build-up perspective, a stronger Yuan will probably help them pay for it."
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