Gold slides as firmer dollar undermines commods

Reuters) - Gold broke a three-day rally to fall on Wednesday, under pressure from a rebound in the dollar and a broad decline in other commodities, although potential demand growth from China was expected to stem any severe slides.

Data from China, a major consumer of silver and the second-largest consumer of gold, showed inflation picked up more than expected in April, while industrial output slowed.

The dollar pared earlier losses and rose against the euro, which came under pressure from mounting worries about how European officials will solve the debt problems of Greece and Portugal.

Spot gold fell 0.4 percent to $1,508.54 an ounce by 1338 GMT, leaving the price on course for a 1 percent rise this week, while COMEX gold futures for June delivery were down 0.5 percent at $1,509.60.

“We had Chinese inflation numbers this morning ... which helped alleviate some of the risk of further monetary policy tightening in China, but as far as gold is concerned, it’s still trading with the broader market,” said VTB Capital analyst Andrey Kryuchenkov, adding that the rebound in the dollar against a basket of currencies had exacerbated the decline.

Earlier, gold benefited after data showed high inflation and slowing growth in the world’s second-largest economy, which could increase demand for bullion in its capacity as a hedge against rising price pressures.

“Inflation remains above the government’s desired target. Although it’s not accelerating, it’s nevertheless above target,” said Standard Chartered analyst Daniel Smith.