NEW YORK (TheStreet) -- Gold prices were holding above $1,100 Friday despite rumors of rate-tightening in China.
Gold for April delivery was rising 60 cents to $1,108.80 an ounce at the Comex division of the New York Mercantile Exchange. Prices have traded as high as $1,119.50 and as low as $1,106.70. The U.S. dollar index was falling 0.44% to $79.96. Spot gold was rising slightly, according to Kitco's gold index.
Tempering gold's upside is the threat of an interest rate hike in China. After the country reported a 2.7% rise in inflation in February, many analysts speculate that China will tighten credit to cool economic growth as early as this weekend. Typically, investors buy gold as an alternative asset during times of inflation, and any end to free money would hurt prices.
Supporting gold prices Friday are a weaker dollar and stronger risk appetite for commodities. A better-than-expected February retail sales report buoyed investor sentiment as U.S. consumers shopped despite massive snowstorms across the country. Also, eurozone industrial production rose 1.7% in January fueling hopes that an economic recovery in Europe might be sustainable despite credit problems in Greece and Portugal.
"Gold [is sensitive] to the prospect of higher interest rates," says James Moore, analyst at thebulliondesk.com in his daily metals report. "Given the likelihood of a hike by China the threat of further pressure remains, but for now we expect the risk to the downside to be limited with good volumes of physical interest ... below $1,100." Other analysts are not as optimistic. According to a Bloomberg survey of 19 traders, nine are forecasting lower prices for next week, while three were neutral and seven were looking for stronger prices.
Silver prices were rising 2 cents to $17.18 while copper was up 1 cent to $3.39.
