Brokers' notes: Oil falls one per cent; gold declines too

Gold
Gold slipped to its lowest level in nearly a week on Tuesday as weaker equities prompted speculators to sell bullion to cover losses, but an expected drop in US existing homes sales could spur a rebound. Demand in India, the world"s largest gold consumer, rises during the festive season, which begins with Raksha Bandhan today and lasts through November with Dhanteras - the single-biggest gold buying day. Investors await the release of U.S. existing home sales, which are expected to show a drop of around 12 percent in July, underlining the weakness of the housing market. Lacklustre US data could boost gold's safe-haven appeal in times of uncertainty.

Yen/dollar
The yen was broadly higher and edged back up towards a 15-year peak against the dollar hit earlier in August. Japanese Prime Minister Naoto Kan and Bank of Japan Governor Masaaki Shirakawa discussed the yen and had agreed to work closely in a phone conversation held on Monday, but Kan did not ask the central bank to ease monetary policy further, and the two did not touch on currency intervention either. Market players say the most likely response from Japanese authorities may be for the BOJ to increase the size or extend the duration of its three-month fixed rate fund supply operation. But traders are sceptical that Japanese authorities would resort to yen-selling intervention unless the yen's rise picks up more speed.

UK sterling
Sterling fell to a one-month low of $1.5432 on remarks from Bank of England official Martin Weale, who said the UK faced a "real risk" of a second recession. The remarks were published in The Times.

Indian rupee
The rupee weakened to its lowest level in over a week on Tuesday, as losses in the euro and other regional currencies hurt sentiment, while range bound local shares provided little direction on capital flows. Indian equity markets slipped on Tuesday on weak world markets, with investors nervous about the health of the global economy. Directions in equity markets provide clues on the amount of capital flows which influence the local unit. So far in 2010, despite investments of $12.4 billion in equities, the rupee is still weak on the year, due to inconsistency of the flows. Last year, record inflows of $17.5 billion had helped the rupee gain 4.7 per cent.

Australian dollar
The Australian dollar hit a one-month low on Tuesday as fears of a hung parliament grew stronger. Near-term support for AUD is at 100-day moving average of 88.35 and resistance at Monday's high of 89.82. Markets are still nonchalant to Australia's cloudy political outlook, with AUD clearly more threatened by short-term mood swings in markets for now. It looks almost certain that no party will have a majority with a handful of independents holding the keys to power.

Oil
Crude oil fell almost one percent on Tuesday, down for a fifth day, under pressure from weakness in gasoline which fell to a 6-½ month low as the US driving season draws to a close without triggering a stockpile drop. Crude inventories in the U.S. were forecast to have climbed 800,000 barrels last week, a Reuters survey showed, while stockpiles of distillates including heating oil and diesel may have advanced 1 million barrels, in what would be their 13th consecutive weekly gain. The US driving season, when holidaymakers take to the roads, sending demand for motor fuel to its annual peak, will finish with the Memorial Day long weekend in early September.