Gold price weakens further after breaking below 1200 yesterday. The benchmark contract falls to a 6-week low at 1186 in European session. Lack of catalysts, rebound and USD and profit-taking are factors driving the yellow metal lower.

Appetite for gold was also hammered as the State Administration of Foreign Exchange (SAFE) in China reiterated gold will not become a main investment channel of its foreign exchange reserves. In the third in a series of statements explaining its work to the Chinese public, SAFE said that 'the US Treasury market is a very important market for China' as the bonds deliver 'fair good security, liquidity and market depth with low transaction costs'. At the same time, gold investment would not help China diversify its portfolio, according to SAFE.

Crude oil remains soft in European session as stock markets lose ground. Currently trading at 71.7, the front-month contract for WTI crude oil has plunged for a 7th day, the longest streak since early May. Although the US Energy Department will likely report decline in crude oil inventory in the weekly report tomorrow, investors still choose to dump the commodity as they concern about the macroeconomic outlook. Moreover, correlation between oil and stock markets has been high. Therefore, falls in equities should lead to oil weaknesses.

Stocks were generally lower in Asia. The MSCI Asia Pacific Index fell -0.7% while Hong Kong's Hang Seng Index slipped -1.1% and Australia's S&P/ASX 200 index edged down -0.5%. Chinese oil companies were one of the biggest losers as Chinese government's imposition of resources tax will reduce profits.

China will implement a resource tax on coal, oil and natural gas in its western regions, citing Premier Wen Jiabao. 'Western regions' should include provinces named Shaanxi, Gansu, Ningxia, Qinghai, Xinjiang, Sichuan, Chongqing, Yunnan, Guizhou, Tibet, Guangxi, and Inner Mongolia. The tax, introduced in Xinjiang last month, is expected to expand to the western part of China and then to the world country. The news, however, came earlier than previously anticipated and it's detrimental to oil companies with large exposure in the western area. Among the 3 biggest listed oil companies, Petrochina will be hurt the most while CNOOC the least.

European bourses open lower, paring gains made yesterday as weak US ISM services index hurt sentiment. Although the final estimate of Eurozone's 1Q10 GDP was unchanged from the previous reading (+0.2% q/q and +0.6% y/y), investors worry that growth in Germany's factory orders would have eased to +0.4% m/m in May, from +2.8% in the previous month.

We have a light economic calendar today. Apart from Germany's factory orders, Canada will release the Ivey PMI which probably improved to 64 in June from 62.7 a month ago.