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By Bloomberg

Investors are returning to the safety of gold.

Following the biggest monthly drop in two years, gold has risen almost every day in August. China’s yuan devaluation has sparked safe-haven demand and added to concern that more countries will weaken their currencies. Gold for immediate delivery climbed for a fifth day, the longest run since May, and increased as much as 1 percent to $1,120.02 an ounce.

“The gold price is the sum of all fears, and we’re seeing a reflection of nervousness in the market following the yuan devaluation,” Ross Norman, chief executive officer of Sharps Pixley, a London-based metal dealer, said by phone. “We’re now seeing good price strength with fresh longs coming in.”

China’s decision on Tuesday to devalue the yuan and shift to a more market-determined rate sparked concern that the world’s second-largest economy is faltering. Vietnam widened the trading band on its currency Wednesday, underscoring the risk of competitive devaluations that’s dragging down emerging-market exchange rates from Brazil to South Korea.

Gold is often used as an alternative store of value and tends to rise when currencies weaken.

The metal traded at $1,117.50 at 11:03 a.m. London time according to Bloomberg generic pricing. Gold for December delivery gained 0.7 percent to $1,115.80 on the Comex in New York, where volume was more than double the 100-day average for the time of day.

U.S. Rates

Traders are pricing in a 40 percent chance the Fed will raise borrowing costs at its September meeting, based on the assumption that the benchmark rate will average 0.375 percent following the increase, data compiled by Bloomberg show. That’s down from 54 percent on Aug. 7.

Looser monetary policy often benefits gold, which doesn’t pay dividends or interest, like stocks or bonds.

“The Chinese move is going to make it even more difficult for the U.S. to raise interest rates,” Mark O’Byrne, the executive director of Dublin-based brokerage GoldCore Ltd., said by phone.

Silver rose 0.2 percent to $15.31 an ounce. Platinum was little changed at $991 an ounce, while palladium gained 0.8 percent to $605.25 an ounce.