Gold extends Friday's rally and marches to new high as 1125 (intra-day high 1127.9) as weakness in USD increases demand for gold as safe-haven asset. USD plummets against major currencies after Japan reported stronger- than-expected economic growth. Inline with gold's rally, silver jumps +1.6% to 17.66 while platinum surges to a new 2009-high of 1404.

Crude oil price also recovers to 77 after plunging to 1-month at 76.35 last Friday as robust GDP data in Japan spurs expectations for demand recovery. Others in the energy complex also rebound with heating rising to 1.98 and gasoline to 1.93.

Japan's GDP expanded at an annual +4.8% (consensus: +2.9%) in 3Q09 after a +2.7% gain in the previous quarter as mainly driven by public spending. Later today, the Eurozone's report will probably show CPI increased +0.3% mom in October. In the US, retail sales is expected to have risen +0.9% mom in October after contracting -1.5% a month ago.

USD drops for the second day against the euro, pound and other commodity currencies for the second consecutive day and the trend likely continues. Liu Mingkang, Chairman of China Banking Regulatory Commission, said the 'The continuous depreciation in the dollar, and the U.S. government's indication that, in order to resume growth and maintain public confidence, it basically won't raise interest rates for the coming 12 to 18 months, has led to massive dollar arbitrage speculation'. In particular, low rates and the slump in USD have 'seriously affected global asset prices, fuelled speculation in stock and property markets, and created new, real and insurmountable risks to the recovery of the global economy, especially emerging-market economies'.

Commitments of Traders

  • Crude Oil: Net speculative long positions shrank to 88K contracts last week as oil price plummeted. We anticipate further decline in net longs in coming weeks as crude oil price has probably formed a temporary top at 82
  • Natural Gas: Net shorts increased for a 5th consecutive week to -160K contracts. Increase in gas supplies together with warm-than-expected temperature in the US continued to weigh on price
  • Gold: Net speculative long positions dropped for a 4th week to 238K contracts last week. Gold price continued to make fresh highs after mild consolidation. Speculations on central bank purchases and weakness in USD are key price drivers.
  • Silver: Net speculative long positions fell to 380K contracts. Although recent rally in silver has been driven by upsurge in gold, its fundamentals remain weak
  • Platinum: Net long positions increased to 20.3K contracts. We expect further rise in net longs in the coming week as demand has been boosted by strong auto sales in China.

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