Gold continues its rebound on high Chinese inflation

Gold continued its rebound for the fourth consecutive session after the data released from China showed that inflation rose to 5.3% in April, exceeding estimate of 5.2%.

The escalating inflation has been one of the factors that helped gold to reach record high and it seems to continue for a while. China's rising inflation prompted policy makers to raise interest rate four times since October and may continue tightening which may, in turn, affect global recovery.

In addition, German inflation data released today also showed a rise in inflation to 2.7% in April (according to the EU harmonized reading) from 2.6%, where the BoE will release the quarterly inflation report for May later in the day.

Inflation is largely driven by the advance in oil prices which bounced on the back of the unrest in the Middle East and North Africa and as long as the unrest is continuing oil prices may continue their rally. Oil rebounded for the third day to trade at $103.66 an ounce compared with the day's opening of $103.33.

Also, the Greek debt woes gave another impetus to gold prices after the downgrade by S&P which lowered the country's credit rating to B from BB-, one level below the lowest credit rating. The country joined Belarus as the lowest rating in Europe and may need to restructure its debt otherwise it may default.

On the other hand, the US dollar is showing slight rise today against a basket of major currencies as it is hovering around 74.66 from the day's start at 74.53, according to the dollar index. If the dollar continued its rebound that started last week, it may weigh on gold prices and commodities in general.

Silver, which fell 27% the previous week after the fourth rise by the CME group on COMEX silver futures margins, trailed the advance in gold as it is trading at $39.40 from the day's starting level of $39.16.

Among other precious metals, platinum edged down to $1798.00 from the day's opening of $1803.50 and palladium plunged to $727.00 from $733.20.