Crude oil prices recovered modestly today after declining sharply over the past 3 days. The WTI-Brent spread widened to a record level -11.77 yesterday as the market has already re-focused on fundamentals. Ample stockpiles in Cushing, Oklahoma and mixed US employment data made WTI crude look weaker than other oil benchmarks.

Looking at forward curves, it's shown that Brent crude reacted faster to the crisis in Egypt. The front-end of the curve was shifted higher, thus making contango less steep. For WTI crude oil, the curve remained steep as price already corrected in the middle of last week amid worries over huge stock-builds. The US job market continued to struggle as shown in the employment report and jobless claims data. The pace of US recovery also affects oil demand, hence oil prices.

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Currently trading at 1355, gold price has apparently formed a bottom at 1309.1 on January 28. Recent sideways trading for the metal is a result of severe reduction of net length in futures and liquidation of long ETF positions. Investment demand drops amid expectations of a turn in global interest rate cycle. However, we believe interest rates have to move significantly higher to reverse the long-term uptrend of gold price.

US yields have been surging with the 10-year note yields climbing to the highest level in 9 months. The chart below shows that the rise in US yields should be accompanied with the drop in gold price. Gold's recovery after making a bottom in late-January is driven by robust physical demand from emerging markets.

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Copper retreated after soaring to a record high of 10160 yesterday. Strong global manufacturing PMIs pushed the metal higher last week. The upcoming event is China's trade data for January. The market expects the world's largest buyer of base metals would report a slowdown in demand as China accelerated tightening measures to curb inflation and asset bubbles.