Similar to equities, oil prices remained pressured in European session as investors did not find Obama's plan appealing. The front-month contract for WTI crude oil price slipped for a second consecutive day to 88.3/88.6 although crude inventory drew more than expected last week. Crude stockpile fell -3.96 mmb to 353.09 mmb in the week ended September 2. Cushing stock also slid -0.40 mmb to 32.67 mmb, the lowest level since November 2010 but inventory continued to build at PADD 2 (Midwest). The stubbornly high inventory level in PADD 2 has contributed a great deal to the fall in WTI price.

In the latest Short-term Energy Report, the DOE/EIA revised down its global and US growth forecasts as economic activities have slowed down recently. US real GDP is expected to grow +1.5% this year and +1.9% in 2012, compared with +2.4% and 2.6%, respectively, projected in August. World GDP as weighed by oil consumption will probably expand +3.1% in 2011 and +3.8% in 2012, down from + 3.4% and 4.1%, respectively in the prior report. The agency also made modest changes in global demand outlook. Oil demand is expected to rise +1.58% y/y to 88.2M bpd this year (August: 88.19M bpd), then by +1.58% to 88.2M bpd (August: 89.83M bpd) in 2012. As we await the forecasts from the OPEC and the IEA, we expect the IEA will revised lower its global oil demand estimates for both 2011 and 2012, making them consistent with the deteriorating economic outlook.

Gold strengthened further as various uncertainties continued to cloud the economic outlook. New unveiled that former Libyan leader Qaddafi sold 29 tons, around 20% of Libya's gold reserves, of gold worth of US$1.7 B beginning in April. The news might have affected the market but the impact should have been little. Central banks in emerging economies remained allured to the yellow metal. In central Asia, Kazakhstan's central bank said earlier in the week that it would be buying up the country's total gold output from January 1, 2012 to at least 2014/15 in an attempt to diversify from exposure to the US dollar.

Headline CPI in China eased to +6.2% y/y in August, from +6.5% in July, as the rise in food prices moderated. Core inflation (excluding food), however, increased to +3.0%, up from +2.9% in July. While staying at elevated level, the report sent further signal that Chinese inflation has peaked in July and the government might turn less aggressive in tightening. Yet, at current inflation level, we do not think investors' interests in buying gold as inflation hedge would be dampened. Data from the Industrial and Commercial Bank of China (ICBC) showed that trading volume for precious metals exceeded 11M tons while turnover rose above RMB 1 trillion as of August. Gold should remain a sought-after asset among Chinese investors.