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China’s Interest Rates Hike Helps Gold, Hurts Copper

February 8, 2011 at 18:36 by Vladimir Vyun

China raised its interest rates today, increasing demand for precious metal, including the gold, as an inflation hedge and decreasing demand for the copper. China raised its interest rates for the third time since October in an attempt to slow the accelerating inflation, which experienced the fastest growth in 30 months. India, Indonesia, Thailand and South Korea also increased their interest rates this year.

Concerns about inflation pressure prompted traders to buy precious metals. On the other hand, anticipated China’s slower economic growth may diminish demand for industrial metals, reducing attractiveness of the copper. In the long run, though, outlook for the global economic growth remains positive, so demand for the copper should rebound. As for the gold, it retains its appeal even as the global recovery continues.

March futures for delivery copper dropped $0.011 (0.2 percent) to $4.564 per pound by 10:42 on COMEX. The price reached the all-time high of $4.6375 yesterday before the drop.

April futures for delivery gold gained as much as $19.20 (1.4 percent) to $1,367.40 per ounce as of 11:42 on COMEX. The price touched $1,368.70 earlier, the highest level since January 20.

If you have any questions and comments on the commodities today, use the form below to reply.

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