Crude oil changes little in Asia Monday after last Friday's rally. The front-month WTI contract trades narrowly around 75.5 as the market digests the dramatic price action in the prior week. Strength in stock markets continues to support oil prices. In Japan, the Nikkei 225 Stock Average jumped +3.05% to 9265.4 as the BOJ called for an emergency meeting today. The MSCI Asia Pacific Index added more than +1%.

Fed Chairman Bernanke's speech at Jackson Hole last week boosted market confidence as he reiterated the view that the US economy continued to grow despite the slower pace. It appeared to have no immediate need to implement additional unconventional measures, suggesting the US economy might not be as poor as previously feared. This also triggered selloff in the bond market and rally in the stock market. Finally, Bernanke's affirmation that the Fed has sufficient tools to stimulate growth and fight deflation soothed market worries.

Today in Asia, the biggest news is that the Bank of Japan (BOJ) called for an emergency meeting. It's expected the central bank will announce measures to curb yen appreciation. USDJPY has plunged more than -10% since early May and reached a multiyear- low of 83.6 last week before rebounding. There are several measures the BOJ can use, such as t the maturity of the 3-month fixed-rate operation to 12 months, increasing government bond purchases or cutting its overnight rate call target , to stem the rally.

Gold trades within a narrow range as risk appetite improved and bond prices declined from record high levels. In the near-term, the yellow metal may drop a bit further as investors seek investments with higher yields. However, over the long-term, we believe gold remains attractive as macroeconomic data in 2H10 could be disappointing. Moreover, the Fed, as well as several other central banks in the advanced economy, will keep interest rates at exceptionally low levels for an extended period. A low-rate environment is supportive for gold.

Commitments of Traders:

Speculators were bearish towards the energy complex in the week ended August 24 as weaker-than-expected US economic data intensified concerns over the recovery outlook. Net length for crude oil plummeted -34 733, or -56.0%, to 27 323 contracts, the lowest level in 7 weeks. Contraction in net length was in tandem with the selloff in oil price. The change in oil products was also dramatic. While net length for gasoline slipped -7 575, or -31.7%, to 16 342 contracts, the lowest level since January 2007, heating oil recorded its net speculative short positions for the first time in more than 3 years as distillate inventory continued to build aggressively while demand failed to catch up. During the week, long positions dropped -4 733 while short positions surged +8 147, resulting in net shorts of 12 880 contracts. Net shorts for natural gas increased for a 3rd straight week to 163 196 contracts.

With gold as an exception, net lengths dropped for all members in the precious metal complex as silver and PGMs have heavy industrial applications. Net length for gold surged +16 963, or +8.31%, to an 8-week high of 221 191 contracts on safe-haven demands. During the week, gold price also rallied to a 7-week high. Net length for silver slid -765, or -2.15%, to 34 807 contracts. We saw contraction in both long and short positions but the former was more rapid. For PGMs, net length for platinum dropped -657, or -3.88%, to 16 260 contracts while that for palladium was down -785, or -6.30%, to 11 667 contracts.

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