Strong GDP Growth and Inflation Increased Pressure on RMB Appreciation. Gold Should Benefit.

China's economic growth beat market expectations in the first quarter. According to the National Bureau of Statistics, GDP expanded +11.9% y/y in 1Q10, compared with consensus of +11.7%. The strongest-growth-in-3-years, together with fast-expanding industrial production (+18.1% in March) and retail sales (+18% in March) should pressure the government to increase the flexibility of the RMB. Other tightening measures, such as rate hikes, may be implemented.

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Strong GDP Growth and Inflation Increased Pressure on RMB Appreciation. Gold Should Benefit.