Gold price continues to trade higher to 916.2 in European morning. Holdings in SPDR Gold Trust rose to 1038.2 metric tons yesterday, indicating investment demand re-emerges as prices fall below 900 level and stock markets decline.

In fact, gold has been treated as safe haven during economic crisis. Since the last quarter of last year, economists have forecast world economy will face the worst recession since World War II. From central banks' reserves and positions held by institutional investors, we believe major investors in the market have turned risk-averse and investment demand in precious metals should continue to hold up for the rest of the year.

The second Central Bank Gold Agreement (CBGA2) will be expiring Sep 26. In this last year of the agreement, sales of gold have been so far limited. Only France, Netherland and Sweden reported an aggregate of 56 tons gold sales while the remaining 24 tons were sold by unknown source.

According to Credit Suisse Research, investments in gold and platinum ETFs have surged rapidly in 2009. Among the 16 gold ETFs under coverage, holdings increased to 332 tons in the first 2 months of the year, which is 48 tons higher than the total holdings in 2008. Concerning platinum, investment in ETFs incased 22% since the beginning of the year. The large inflows of capital to precious metals were mainly by institutional investors who would like to park their money in safe-haven in light of greater economic uncertainty. It's inevitable that other applications of gold and platinum, such as jewelry, will contract this year due to global recession. However, if the pace of investment demand continues to be robust, we believe prices of both metals will be lifted from current levels.


Crude oil price recovers to 43.26 in European morning after plummeting to 42.08 yesterday. Recently, the only positive factor is the potential output cut in March. Since September 2008, OPEC has reduced daily production targets by 4.2M bpd. The market expects a 0.5-1M bpd will be announced this Sunday.

In our morning piece, we stated that gasoline demand in the US is highly related to the housing market. Below we posted a chart for the readers' reference.