Copper Futures Catch a Bid

Gold is higher by $4.60.
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Updated from 2:59 p.m. EDT

Copper prices popped up almost 6% Thursday, mostly thanks to news that China's economy has grown faster than forecast so far this year, but boosted also by declining metal inventories.

Prices for May-dated contracts surged 16 cents to $2.99 a pound on the Comex division of the New York Mercantile Exchange. The

PowerShares DB Base Metals

(DBB) - Get Report

exchange-traded fund, which tracks other industrial metals prices as well as copper, rallied more than 3%.

Industrial production in China grew almost 20% in the first two months of the year, according to new government data, besting consensus estimates and helping accelerate the rally in copper which has risen from under $2.40 a pound in early February.

"Judging by the way metal imports have picked up, which was dramatically, it looks like China's destocking is over," says William Adams, an analyst at

BaseMetals.com

in London, who notes that apparent consumption had looked negative as the country's metal users drew down inventories late last year rather than purchase on the international market at high prices.

Adams also says falling levels of inventory in London Metal Exchange warehouses are helping to bolster prices.

Turning to the technical side of things, chart watchers see the way clear for the rally to continue.

"The key move was above the 100-day moving

average at $2.88," says Joe Palmisano, senior technical analyst at IDEAglobal in New York, which he says points to a target price of between $3.07 and $3.15 a pound.

The copper stocks followed the metal higher, with shares of

Freeport-McMoRan Copper & Gold

(FCX) - Get Report

surging 6.1%,

Southern Copper

(PCU)

ahead by 3% and

Phelps Dodge

(PD) - Get Report

up around 1.7%.

Elsewhere, nickel prices were breaking records on the London Metal Exchange, with benchmark contracts for delivery in three months changing hands at $46,190, as stocks dwindled by 220 tons to 3,594 tons. LME stocks totaled about 6,600 tons at the beginning of the year.

Diversified mining stocks were stronger, with

BHP

(BHP) - Get Report

and

Rio Tinto

(RTP)

up 3.6% and 2.6%, respectively.

As for gold, prices were also gaining on the Comex. April-dated contracts added $4.60 to $647.10 an ounce, largely reversing Wednesday's losses.

Market observers point to new data showing a spike in producer prices and falling claims for unemployment insurance as sparking fears of inflation and adding to the metal's allure as an inflation hedge. Some investors purchase gold as long-term protection against the wealth-withering effects of a generally rising price level.

The bullion ETFs,

iShares Comex Gold Trust

(IAU) - Get Report

and

streetTracks Gold Shares

(GLD) - Get Report

, were both up about 0.1%.

Foreign exchange traders gave the greenback a mixed reaction. A dollar was buying 117.625 yen, up from 117.07 yen in the prior session, and the euro was changing hands for $1.3234, up from $1.3229 previously. Over time, gold prices tend to move inversely with the value of the U.S. currency.