Gold climbed higher in European session, catching up with euro's strength yesterday. Currently trading at 1251, uptrend for the yellow metal remains intact and as long as uncertainty in macroeconomic outlook persists, gold still has a chance to rise to a new record high. Crude oil trades narrowly around 74 after yesterday's rally. Despite a boost by robust manufacturing data, underlying fundamentals in the US oil market remains weak. We doubt if crude's rally can sustain.

Today's focus is on ECB's monthly meeting. While it's widely expected that President Trichet will leave the main refinancing rate unchanged at 1% and state current interest rates as appropriate with balanced risks to economic outlook, we expect the central bank will extend the full allotment of refinancing operations until the end of the year.

The ECB Staff's economic projection will also be released. Although recent data released in the Eurozone has been, policymakers tend to be cautious in forecasting the outlook as a US slowdown in the second half should affect global economy, including the Eurozone. Our economic team expects ECB will revise GDP growth to +1.3% in 2010, compared with +1% projected in June. GDP growth for 2010 should remain unchanged at +1.2% while HICP for 2010 and 2011 are expected unrevised at +1.5% and +1.6% respectively.

PGMs rallied yesterday as strong manufacturing data in the US and China lifted demand optimism. While categorized under the precious metal complex, PGMs and gold may move in opposite directions as the former has heavier industrial applications. Apart from robust economic indicators, PGMs' strength was also driven by likely strike action at Northam Platinum, a miner in South Africa. Currently trading at 1544, the benchmark contract for platinum extends gains for a second day after adding +0.80% yesterday. The metal slipped -3.38% in August due to worries about global economic slowdown. The contract for palladium changes little in European session today after staying a +3.64% rally to settle at 520.1. The intra-day high at 529.5 is the highest level since May 14.

South Africa's National Union of Mineworkers (NUM) said that over 6000 mineworkers employed by Northam Platinum will strike on September 6 as the union and the company failed to reach an agreement on wage increments. NUM demands a +15% wage increment and a Living out Allowance of 3500 rand while Northam offers +8% on a two year deal and an additional 100 rand on Living Out Allowance bringing the figure to a mere 1700 rand per month. Supply/demand balance for platinum is tight and the strike should worsen the situation. This is going to push platinum price higher.

PGMs also reacted to auto sales data in August which probably showed mixed results in the US in China. In the US, light vehicle sales slumped to an annualized rate 11.47M units in August. Among carmakers, Toyota Motor and Honda Motor faced the deepest plunges, by -34% and -33% respectively, during the month. Worries about a double-dip recession in the US dampened appetite to spend. On the contrary, China's passenger-car sales jumped +59% to 977.3K in August from the same period last year.

Investors should note that while both platinum and palladium benefit from a stronger auto market, PGM loadings in different countries vary. Vehicles in the US and China are mostly diesel-fuelled and have higher palladium loadings while those in European countries are mostly gasoline-fuelled and have higher platinum loadings. Moreover, emission standard and engine size also matter. Hence, PGM loadings in US vehicles are higher than Chinese ones.