Brokers' notes: Oil prices fall to one month low; gold continues to trade firm

Gold continued to trade firm and is likely to decline as gold’s rally to a six-week high prompts some investors to sell the metal. The US dollar was also little changed against the euro after earlier rising amid speculation the economy may be slowing enough for the Federal Reserve to increase bond purchases. Gold, which usually moves inversely to the greenback, reached $1,229.07 an ounce yesterday, the highest price since July 1.

UK sterling pared losses and moved to session highs versus the euro and the dollar on Wednesday after minutes showed no Bank of England policymaker voted to loosen monetary policy in August. The pound had fallen to a three-week low versus the dollar on trader speculation that the minutes could have revealed a three-way split decision, which would have meant one member voting for an increase in the Bank's quantitative easing programme. As widely predicted, Monetary Policy Committee member Andrew Sentance called for a 25 basis point rise in interest rates for the third month running. The BoE's lower growth forecasts at its August inflation report, combined with its persistent view that inflation factors would be temporary, had left the market sensitive to potential for further quantitative easing in the run-up to the minutes, which had weighed on sterling.

Oil prices fell to a one month low below $75 on Wednesday after an industry report on Tuesday showed a sharp increase in petroleum inventories in top consumer the United States. If the industry data is confirmed by another set of weekly figures from the U.S. government due out later on Wednesday, it would send the combined crude and product inventories in the world's top economy to a record high. Oil Prices are now centred near the mid-point of the $64.24-$87.15 trading range so far this year as increases in energy demand in emerging markets has been insufficient to drain ample supplies in other areas in the world.

The Indian rupee treaded water on Wednesday as gains in the domestic equity were mostly offset by a broadly stronger dollar overseas. The index of the dollar against six major currencies was 0.2 percent higher. Most regional peers too traded weaker against the dollar. Traders watch share moves for cues on the direction of capital flows. So far in 2010, foreign funds have invested a net $11.7 billion in local shares, in addition to last year's record $17.5 billion investment when the rupee had risen 4.7 percent. But, due to the inconsistency of flows this year, the rupee has not appreciated much despite the inflows, dealers said. The local unit is slightly weaker on the year.

Source: Richcomm Global, Dubai, www.richcommglobal.com