The Chinese central bank's announcement of higher rates Tuesday arrived alongside some pessimistic trading patterns in the equities and sent investors running for cover across the board.
The People's Bank of China said it would raise lending and deposit rates in an effort to curb inflation and the asset bubbles that are developing in the world's second-largest market – particularly in the real estate sector.
The news tempered expectations that China's economy will continue to grow at a furious rate, and drove demand for the dollar. Despite its current relative weakness and some concern about the effects of another round of quantitative easing, the greenback retains an important role as a haven asset and a reserve currency. A rising dollar typically means less demand for precious metals, so it's no surprise that gold futures and silver futures slumped on the China news.
"Higher global rates are bad for gold," Bayram Dincer, an analyst at Swiss firm LGT Capital Management, told Bloomberg News.
On the Globex electronic exchange, December gold futures lost $31.40 to trade at $1,340.70 per troy ounce. Silver futures for December delivery dropped 72.3 cents to trade at $23.69 per troy ounce.
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