Gold shed 1% and silver tanked almost 8% on a broad commodity selloff, as the U.S. dollar index rose more than 1% to $75.41 on the back of a significantly weaker euro. Silver had also risen for two trading days and gold for three, so investors might also be booking profits. Some traders were looking to even bet against higher prices, especially in silver. Scott Redler, chief strategic officer at T3Live.com, said he initiated some short positions yesterday as did other traders.
Gold and silver found no support from rising inflation data. China said prices slipped to 5.3% in April from 5.4% in March, but this number was higher than the 5.2% reading expected. The U.K. also said prices fell to 4% in the same time period but the Bank of England said that inflation could hit 5% in 2011. Germany reported that inflation rose to 2.7% in the country, the highest level in a few years. Next up is Friday's reading on U.S. inflation for April. Inflation, including food and energy, is at 2.1%. China seems to be in a bind as inflation numbers are still high but industrial output fell, which means that prices are rising but its economy is slowing. Continuing on an aggressive rate hike plan would be good for inflation but could slow the economy too much. Leaving rates alone would give a green light for inflation. Currently the deposit rate is 3.25%, making real interest rates a negative 2.05%. Food prices came in at 11.2%, down from the previous reading of 11.7%, but still high. Tony Crescenzi, strategist, portfolio manager at Pimco, said in a recent note that higher food prices in emerging market economies can trickle down to wage inflation much faster than in developed economies.