* Gold hits highest in nearly three weeks on short covering
* Metal recovers from rate hike in China, which hits commods
* Strong Chinese buying expected post-Lunar New Year
(Updates prices)
By Amanda Cooper and Jan Harvey
LONDON, Feb 8 (Reuters) - Gold rose more than 1 percent on
Tuesday to a high of $1,366 an ounce as traders covering short
positions in the New York futures market pushed spot prices
through key resistance at the metal's 100-day moving average.
The metal unexpectedly made up the ground it lost earlier
after a rise in Chinese benchmark interest rates pressured
commodities, as the move was seen potentially curbing demand for
raw materials in China's charging economy.
Spot gold <XAU=> was bid at $1,362.80 an ounce at 1604 GMT,
against $1,350.46 late in New York on Monday. U.S. gold futures
for April delivery <GCJ1> rose $15.50 an ounce to $1,363.70.
"GCJ1 has broken Friday's highs," said Afshin Nabavi, head
of trading at Geneva's MKS Finance.
He attributed the move to short covering: "Specs went short
off the China headlines earlier. This is all futures-driven, as
stops are driven through the post non-farm payrolls spike of
$1,361, followed by the 100-day moving average around $1,362."
The gold price came under intense pressure last week after
more signs emerged that global growth continues to improve and
that the euro zone debt crisis has not worsened, which eroded
some investor appetite for the metal.
Its early rebound on Tuesday was short-lived after China's
central bank raised interest rates by a quarter point to 6.06
percent, its second increase in just over a month as it stepped
up its fight against stubbornly high inflation. []
"A kneejerk reaction for commodities is obviously going to
be lower on higher Chinese interest rates," said Simon Weeks,
head of precious metals at the Bank of Nova Scotia.
"(But) demand for gold is still strong," he added. "In the
short term people are expecting China to come back from their
New Year holidays (with) pent-up demand for gold."
Gold buyers in China, the world's second-biggest bullion
consumer, have been absent from the market this week for the
Lunar New Year holidays, but will return on Wednesday.
"The premium on the Shanghai Gold Exchange was still $8 over
the global price when they went away, whereas last year when
they went on holiday it was flat if not at a small discount to
the international markets, so there is still demand out there,"
Weeks said.
COMMODITIES SLIP
Oil prices fell on Tuesday after China's interest rate
increase, while copper prices slipped from record highs. Equity
markets in Europe and the dollar index retreated, meanwhile,
also helping limit losses in gold. [] [] [] []
U.S. stocks were little changed, with investors focused on
corporate earnings and the impact an interest rate hike in China
will have on global economic demand. []
Also supporting sentiment towards gold, investment in
exchange-traded funds showed signs of stabilisation, with
holdings of metal in the SPDR Gold Trust <GLD> up by 1 tonne in
the past week to 1,228.864 tonnes. []
In January the fund registered its largest monthly outflow
of metal since April 2008 as investors favoured equities and
industrial commodities over perceived safe havens.
"The SPDR holdings have been nearly unchanged, and
profit-taking from investors has perhaps stopped for the
moment," said LBBW commodities strategist Thorsten Proettel.
Among other precious metals, platinum and palladium rallied,
although gains were tempered by China's interest rate decision.
Both metals have seen inflows into some of the major
exchange-traded funds in the past week, such as ETF Securities'
U.S.-listed products, indicating investor appetite.
Spot platinum <XPT=> was last up 0.8 percent at $1,852.24 an
ounce, nearing its highest level since July 2008, while
palladium <XPD=> remained within sight of fresh ten-year highs,
last up 1.2 percent at $824.97 an ounce.
Silver <XAG=> was last up 1.8 percent at $29.90. The price
is up more than 6 percent this month so far and is within a few
dollars of 31-year highs seen in early January.
(Editing by Keiron Henderson)
