The main focus today is the suicide bomb blast in Moscow's Domodedovo Airport. The attack killed at least 35 people and was the second attack in less than a year. President Dmitry Medvedev ordered increased vigilance at airports and train stations. He also delayed his departure for the World Economic Forum in Davos. The incident apparently weighed on gold. The yellow metal moved high in much of the trading session due to strength in the euro and a rise in ETF investment. However, the metal got dumped on heavy liquidation coming from the selloff of the Comex February contract which is expiring on January 26. The benchmark contract ended the day at 1344.5, up +0.26%. Oil prices slumped as Arabia's Oil Minister Ali al-Naimi signaled the OPEC may increase output the meet the increase in oil demand. The front-month WTI contract plummeted to as low as 88.27 before settling at 87.87, down -1.39%. The contract remained under pressure in Asian session today.
Weakness in gold may continue as further liquidation of the long February gold futures contract is likely. This may also trigger selloff in silver and PGMs. Further declines are, however, expected to be supported by demand from emerging markets. In Russia, Georgy Luntovsky, the deputy head of the central bank reaffirmed the gold purchase plans from domestic banks. The central bank will buy 100 metric tons of gold per year to replenish the country's gold reserves. While the plan has been known before, the latest announcement signaled official sectors in emerging economies have huge interests in gold.
Concerning macroeconomic data released yesterday, European PMIs were under the spotlight. The broadly positive set of data indicated growth in the region remained underway. The composite index climbed to 56.3 in January from 55.5 in the prior month as driven by a surge in the 'services component' which rose to 55.2 from 54.2 in December. This offset the unexpected contraction in the 'manufacturing component'. Strong PMIs in January also evidenced rising price level, making the ECB more difficult to counterbalance sovereign debt concerns and poor growth prospects in peripheral European economies, with strong growth and rising inflation in core countries, especially Germany.
We have a long series of economic data today. In the UK, GDP probably slowed to +0.5% in 4Q10, following a +0.7% growth in the previous quarter. Public Sector Net Borrowing is expected to have dropped -2.8B pound to 20B pound in December. In Canada, inflation probably picked up modestly in December with headline CPI gaining +0.2% and +2.5% on monthly and annual basis, respectively, in December. In the US, consumer confidence index is expected to have improved to 54.3 in January from 52.5 a month ago. Housing prices for November may be disappointing.