Gold futures tumbled the most in four months on speculation that China will raise interest rates to cool the economy, eroding demand for commodities. Silver also declined. Equities fell worldwide on bets the People’s Bank of China is preparing to raise borrowing costs to fight inflation, which topped a two-year high last month. Every price in the Thomson Reuters/Jefferies CRB Index of 19 raw materials fell today, sending the gauge down the most in 18 months. On Nov. 9, gold rose to a record $1,424.30 an ounce. “The thought of China continuing to tighten spooks commodity markets,” said Matthew Zeman, a metal trader at LaSalle Futures Group in Chicago. “Gold is being dragged down with all commodities.” Gold futures for December delivery fell $37.80, or 2.7 percent, to settle at $1,365.50 at 1:49 p.m. on the Comex in New York, the biggest drop for a most-active contract since July 1. The price fell 2.3 percent this week. The metal has gained 25 percent in 2010. China may increase its benchmark one-year lending rate to 5.81 percent by the end of the year from 5.56 percent, and the deposit rate may climb to 2.75 percent from 2.5 percent, according to a Bloomberg survey of analysts. “Increased inflationary pressure could sustain investor interest in precious metals as they look for a store of value,” analysts at Deutsche Bank AG said today in a report. “However, one of the near-term risks is that Chinese authorities embark on a more aggressive monetary-tightening cycle.” Gold is still in a bull market, said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois. ‘Really Bad Day’ “From a technical perspective, it’s not over for gold,” Kaplan said. “Gold just had a really bad day. If it goes under $1,315, then you can go on the promenade deck and wave the rally goodbye.” Gold and other precious metals are in a “corrective mode” after rallying to new highs this week, said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago. A decline is an opportunity to buy, he said. “The Chinese growth rate is so strong, any token moves to slow down their economy won’t turn off the bull engine in commodities,” Klopfenstein said. Silver futures for December delivery fell $1.463, or 5.3 percent, to settle at $25.942 an ounce. On Nov. 9, the price reached $29.34, the highest level since March 1980. The metal dropped 3 percent this week. The commodity jumped 54 percent this year. Palladium futures for December delivery dropped $30.50, or 4.3 percent, to $673.65 an ounce on the New York Mercantile Exchange. On Nov. 9, the metal reached a nine-year high of $743.50. The price, down 1.7 percent this week, has jumped 65 percent this year. Platinum futures for January delivery slid $61.20, or 3.5 percent, to $1,684.60 an ounce. On Nov. 9, the metal reached $1,811.80, the highest level since July 2008. The price fell 4.8 percent this week. The commodity is up 15 percent in 2010. To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net. To contact the editor responsible for this story: Patrick McKiernan at pmckiernan@bloomberg.net

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