Daily Ticker

Gold and Silver Tumble as Inflation Fails to Live Up to the Hype

Is air coming out of the precious metal commodities bubble? Silver’s sharp slide early Monday could be proof that the bull market in gold and silver has reached its limit. Silver fell nearly 9% in the first 10 minutes of Asian trading to $20.30 an ounce — its lowest level since September 2010. Silver’s stumble also brought down the price of gold; the yellow metal hit a one-month low of $1,338.10 an ounce and extended its slump for an eighth straight day. Gold has fallen more than 7% in May.

Related: Jim Rogers on Gold: Continues to Have a Long Overdue Correction

Silver’s selloff has a lot to do with the rise in the yen, says The Daily Ticker’s Aaron Task. The yen strengthened against the U.S. Dollar after a report by the Japanese government’s Cabinet Office said Japan's economy is gradually recovering after an upturn in exports and factory output. Hedge funds and other institutional investors are reducing their positions in silver and buying the yen to cover their losses, notes Task.

U.S. markets opened the week down to flat after reaching record highs last Friday for the fourth consecutive week. The Dow Jones Industrial Average (DJI) gained 1.6% last week and the S&P 500 (GSPC) rallied 2.1%. The Nasdaq (IXIC) ended last week up 1.8%.

Statements by Federal Reserve officials on Tuesday and Wednesday could have a big impact on stocks. Fed Chairman Ben Bernanke will testify on Capitol Hill on Wednesday and James Bullard, president of the Federal Reserve Bank of St. Louis, discusses monetary policy in Frankfurt on Tuesday. Even though the Fed has hinted that it may soon pull back its $85 billion monthly bond-buying program, the Fed does not need to do “anything,” argues Henry Blodget.

“Inflation is not really a threat right now and the ‘inflationistas’ have been dead wrong,” adds Task. “When you look at what the Fed is doing, you should be buying stocks.”

Related: Weak CPI Reading Means the Fed Will Keep Its Foot on the Gas Pedal

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