Gold regains strength, but China concerns weigh

TOKYO, Apr 20 (Reuters) Gold rebounded on Friday from a sharp drop the previous day, as a recovery in the Chinese stock market induced short-covering, but trading was nervous over concerns about China's blistering economic growth.

Cash platinum reached a five-month high above $1,300 an ounce, reflecting sharp gains in Tokyo futures prices after Thursday's news of another planned launch of platinum exchange-traded funds.

Traders said investment funds were reluctant to chase gold on rallies and keen to lock in profits, as worries persisted that Chinese share prices could be fragile amid growing speculation that China will raise interest rates to constrain growth.

Commodities prices tumbled in late February, after a plunge in Chinese equities triggered a heavy sell-off in global shares.

''The market is in a corrective phase. Profit-taking is likely to dominate for a while on rallies as the market is starting to get worried about the steep growth in the Chinese economy,'' said Koji Suzuki, market analyst at Kazaka Commodity in Tokyo.

''But there is no distinct reason to sell gold heavily now, so we'll see steady demand from India and other Asian players on price dips.'' As of 0650 GMT, cash gold was trading at $684.70/685.20 an ounce, up from $681.70/682.20 late in New York the previous day.

On Thursday, gold briefly touched a fresh 11-month high of $691.50 but profit-taking drove it down to as low as $678.70 -- the lowest since April 13.

Selling pressure increased due to falls in energy prices and concerns over China.

China said on Thursday that its economy grew at a blistering 11.1 percent annual pace in the first quarter on the back of booming investment and exports, fuelling speculation that interest rates would need to rise again soon.

Chinese stocks rose sharply on Friday after tumbling 4.52 percent on Thursday in response to high inflation data, which further fuelled expectations of an early interest rate hike.

The benchmark Shanghai Composite Index <.ssec> was trading up around 4 percent by late afternoon trade.

Technical sentiment for gold remained healthy after confirming solid support below $680 the previous day. Many traders still hoped the market would challenge the important chart level of $700 in the near-term.

Firmer Tokyo Commodity Exchange gold futures also assisted the rally of spot gold on Friday.

Benchmark TOCOM gold for February 2008 delivery closed at 2,637 yen a gram, up 14 yen or 0.5 percent from Thursday's close.

Platinum gained upward momentum after breaking through $1,300 as speculators were keen to take new positions after recent plans to launch platinum ETFs.

Key February TOCOM platinum closed up 1.7 percent at 4,855 yen a gram.

London-based ETF Securities said it will launch physically backed ETFs based on platinum, palladium, gold and silver on the London Stock Exchange. [ID:nL19132005] This plan followed Zurich Cantonal Bank's earlier announcement that it planned to launch ETFs in platinum, palladium and silver by May 10.

Platinum rose to $1,308/1,312 an ounce from $1,295/1,299 in New York.

It reached a high of $1,308 -- the highest since Nov. 21 when it reached a record high of $1,395.

Palladium was little changed at $375.00/380.00 an ounce from $375.50/379.50 on Thursday.

Silver rose to $13.73/13.78 an ounce from $13.65/13.69 late in New York.

REUTERS SR HT1610