Gold Slides on Dollar Rise, Fear China May Cool Growth


"The cusp of prolonged Chinese tightening could further erode gold's inflation argument in the medium term."

Gold futures extended their loss into a second session Thursday, pressured as Chinese inflation data fed expectations Beijing was moving to slow the country's growth, and by a rise in the U.S. dollar.

Sapping demand for precious metals, often seen as an alternative to paper currencies, investors throughout much of the metals session bid up the U.S. dollar on concerns about sovereign debt and proposed U.S. bank restrictions.

February gold ended floor trading on the New York Mercantile Exchange Thursday down $9.4, or 0.8%, to $1,103.2 an ounce. Earlier it had fallen as low as $1,088 an ounce, according to FactSet Research.

Copper, silver, platinum and palladium prices also closed lower. The U.S. dollar hit a five-month high versus the euro

Weighing on gold, copper and other commodities, Chinese data released Thursday showed economic growth jumped 10.7% in the fourth quarter, putting the full-year figure above forecasts.

Inflation was also higher than expected, suggesting recovery is continuing but fiscal and monetary policy may need to be tightened.

The "cusp of prolonged Chinese tightening," wrote Ashraf Laidi, chief market strategist at CMC Markets, "could further erode gold's inflation argument in the medium term."

Gold had briefly pared losses after the Philadelphia Fed said its index of manufacturing activity in the region edged lower in January, worse than expected. A second report, from the Conference Board, showed an index of leading U.S. economic indicators gained 1.1% in December, stronger than forecasts.

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