London — Gold climbed nearly 1% on Tuesday, having drifted near $1,200 an ounce this week, as the dollar fell versus the yuan while investors focused on strong corporate earnings rather than China-US trade tensions.

"At the moment gold is more sensitive to the yuan than the dollar [index], so if the dollar is rallying but not against the yuan, gold is stable. The correlation [with the yuan] is almost one on one," ABN Amro commodities strategist Georgette Boele said.

Chinese shares jumped the most in more than two years on hopes of new government spending and amid a pause in trade tensions, while the dollar slid versus the yuan and a currency basket. A weak dollar makes dollar-priced gold cheaper for nonUS investors.

"We should start bottoming out around $1,200 because we don’t expect a sell-off in the yuan from these levels. We think the authorities will [act to] stabilise it," Boele said.

Spot gold was up 0.7% at $1,214.96 an ounce at 10.25am GMT, while US gold futures were up 0.5% at $1,223.20 an ounce.

Gold has dropped nearly 12% since mid-April, largely failing to benefit from trade tension that has directed safety flows into the dollar away from other traditional safe havens such as gold.

World shares edged towards a six-month high amid the rally in Chinese stocks and strong corporate earnings, with investors setting aside for now a host of simmering global feuds including a US move to reimpose some sanctions on Iran.

Those sanctions include precious metals, US banknotes, steel and coal. "We believe a reversal in gold prices is in the offing, as speculation of a trade war and Iranian sanctions are turning into reality. Further, record short investors positions in gold strengthen our conviction of a price recovery in the second half," ANZ analysts said in a note.

US data from last week showed investors added 13,931 contracts to their net short position in the week to July 31, bringing it to 41,087 contracts, the biggest since records became publicly available in 2006. Silver rose 1.1% to $15.43 an ounce. Platinum gained 1.6% to $833.97 an ounce, while palladium was 1.2% higher at $915.20 an ounce.