Gold hit by Dollar strength after PBOC decision

Bullion rose above the $1,100 mark in the previous session on comments from the Fed's Fischer, before reversing later as a devaluation of the Chinese Yuan pushed the US dollar in the opposite direction.

Gold hit a fresh three-week high of $1,108.50 on Monday after a speech from Federal Reserve (Fed) Vice-Chair Stanley Fischer where he suggested that the Fed might delay a rate hike until policymakers see an upturn in inflation readings.

The sudden move by the People's Bank of China to devalue the renmibi on Tuesday - after a string of disappointing data stemming from the Chinese market - led to dollar strengthening, which is bearish for dollar-denominated gold.

Even though China is the biggest gold producer and can meet some demand from local output, it also buys metal from abroad. The weaker yuan will make imports more expensive for holders of the Chinese currency.

China is seeking to support growth after trade data at the weekend showed that overseas sales dropped more than expected in July.