Oil prices moved sideways in Asian session today as the market pondered the impacts of hurricane Irene which hit the East Coast of the US over the weekend. Over the next couple of months, economic data will be affected. We will probably see jobless claims increase while household spending and industrial production drop. Reconstruction works will, however, boost economic growth later in the year. Gold price reversed gains after initially climbing higher to 1841.5. Failure of Fed Chairman Ben Bernanke to signal QE3 last Friday disappointed some gold bulls. The yellow metal was also weighed down by comments from Michael Fuchs, deputy head of Germany's Christian Democratic Union. Fuchs said that debt-ridden countries in the European periphery should sell part of their gold reserves and use the proceeds to buy back their own 'weakening' government bonds.
While we have a light calendar in Asia and Europe, the focus will be on Chinese tightening. Bank of America said last Friday that the PBOC will raise reserve requirements for 6 large banks. The move will be phased on September 5 and take full effect on February 15 next year. The bank said that the move will drain RMB 900B from the banking system and is equivalent to an RRR hike of +130 bps. We expect the central bank to give some clarifications on the issue. The government may not impose any interest rate hike for rest of the year if this move is implemented. At the same time, French finance minister Francois Baroin said last week that France and China will discuss about the flexibility of RMB ahead of the G20 meeting on November 20.
In the US, personal income probably climbed +0.3% in July from +0.1% a month ago while personal spending rose +0.2% after dropping -0.2% in June. Pending home sales might have stayed flat in July, following a +2.4% gain in the prior month.
Commitments of Traders
With the exception of crude oil, speculators were bearish on the energy complex in the week ended August 23. Net length for crude oil futures rose for the first time in 4 weeks to 136 340 contracts. Net lengths for heating oil futures and gasoline futures declined further to 8 709 contracts and 44 134 contracts respectively. Net short for natural gas futures increased to 192 088 contracts during the week.
Speculators had mixed views on the precious metal complex. Net length for gold futures declined for a third consecutive week, losing -12 405 to 187 681 contracts. Net length for silver futures, however, increased further to 27 011 contracts. For PGMs, net lengths for platinum futures added +4 980 to 40 688 contracts while palladium futures dipped -246 to12 798 contracts.