Gold fell for a second session Thursday as a big rise in Chinese inflation raised expectations that authorities there will start hiking interest rates.

Any monetary tightening by Beijing, which said the country's economy grew by 10.7% in the fourth quarter of 2008, could slow growth there, harming demand for precious metals.

The February contract closed down $9.4 at $1,103.20 an ounce in New York, although it traded as low as $1,088 at one stage.

China's economy grew by 8.7% in 2009 after trumping official growth targets in the last quarter of the year thanks to a massive $586bn of fiscal stimulus and new bank lending of $1.2trn.

The country is now set to take over Japan, expected to contract by 6% in 2009, as the world's second-largest economy behind America later this year.

But a 1.9% increase in consumer prices for December year-on-year, more than double the November figure, heightened fears about higher interest rates.

On the oil markets, crude tumbled 2% on the Chinese rate talk and its impact on demand despite a drop in weekly US crude inventories.

Oil for February delivery fell $1.66 to $76.08 a barrel on the New York Mercantile Exchange to register a second day of losses.

The Energy Information Administration reported a 471,000 decline in inventories for the week ended 15 January as imports fell unexpectedly. Refiners were quiet as US demand showing little sign of recovery.

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