LONDON (Commodity Online): US Treasury Secretary Timothy Geithner helped bring down gold prices with his statement that the US is determined not to devalue the dollar to push up exports to China.

This has brought confidence among investors and they have stopped the panic rush to gold. Following this gold prices climbed down on Tuesday.

In a speech in Palo Alto, California, Geithner said that weakening the greenback to increase exports would not boost the economy. The United States and no country around the world can devalue its way to prosperity, said Geithner, which is in stark contrast to China’s yuan, which he said was significantly undervalued. 

Gold futures on the New York’s COMEX fell $38.10 to close at $1,334 an ounce, after setting a record high October 14 of $1,377.60. The US dollar reversed course abruptly, surging 1.7 per cent against a basket of six major currencies on Tuesday, after a 13 per cent drop since June.

The weak dollar has aided the US economic recovery because consumers are drawn to cheaper domestic products instead of imports, and American exports are more attractive to overseas customers, Geithner said.

Also on Tuesday, China raised its interest rates for the first time since 2007 to curb inflation, but many investors fear the move will impair the growth of the world’s second largest economy.

Uncertainty over the Chinese economy and lingering concerns about the US mortgage market led many investors to pour into the safety of US treasury securities. The flight to quality into treasuries both fueled the increase in the value of the dollar and shifted investors’ focus away from the metals market. 

According to analysts, the gold market is in the first stages of a long-awaited correction and it would not be surprising to see prices fall to as low as $1,200 an ounce.