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Wednesday, February 9, 2011

Gold Rises Inflation Concerns After Chinese Rate Hike

As soon as Gold future are higher in the Result of the third chinese rate hike since Tuesday.according to current scenario the tightening as a sing that inflation is gaining traction in country.

Copper initially fell after the rate hike, but has since pared its losses on idea that Chinese demand remain strong.

At 9:22 a.m. EST, most-active April gold futures were $15.20, or 1.1%, higher at $1,363.40 an ounce on the Comdex division of the New York Mercantile Exchange. The market developed technical follow-through momentum as it rose in the aftermath of news that the People’s Bank of China will increase the one-year yuan lending rate moving to 6.06% from 5.81%.

“China raised rates and gold went up as a confirmation of the inflation story,” said George Gero, vice president and precious-metals strategist with RBC Capital Markets Global Futures.

“Maybe we’re going to see much higher-than-expected inflation numbers out of China,” Zarembski said. “Unless the government really puts the hammer down and makes it known they are serious about cutting inflation, I think the trend overall is still bullish and corrections are a healthy way to get weak longs out of the market.”

Institutional investment demand appears to be returning to gold after its correction lower during the early part of the year.

“In our view, provided there isn’t an over-tightening, then Chinese base metals demand will still be on track for another year of strong, albeit slower, growth” .
 
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