London 01/08/2011 - Gold set yet another new high Friday of $1632.90 after weaker than expected Advanced GDP, Chicago PMI and UoM Consumer Sentiment readings compounded US economic woes as politicians continued to debate various debt resolution plans as the deadline for reaching the $14.3trillion ceiling loomed ever nearer. The yellow metal was up 1% at its peak and silver 1.75% although both finished off their highs, settling with 0.7% and 0.9% gains respectively; palladium finished up 0.25% while platinum closed down 0.5%. Across the month the metals saw solid gains with silver up 15.4%; palladium 9.5%, gold 8.3% and platinum 3.3%. Risk aversion kept equities and the wider commodity sentiment negative; the Dow posted its sixth consecutive down day settling off 0.8%, the S&P500 was off 0.65% and the CRB Index 0.75%. Concerns surrounding US debt and its AAA-credit rating kept the dollar under pressure; the Dollar Index finished down 0.5% while EUR/JPY was off 0.8%. Markets overnight have begun in a more positive tone firstly as Chinese Manufacturing PMI proved slightly better than expected at 50.7 against an estimated 50.2; HSBC Final Manufacturing PMI increased from 48.9 to 49.3. However, the larger focus has been an eleventh hour agreement to raise the US debt ceiling after a weekend of negotiations. US President Barack Obama said “the leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default.” House and Senate officials approved a deal raising the debt ceiling by $2.1trillion and to cut up to $2.5trillion over the next decade. At the time of writing the MSCI Asia Pacific Index was up 1.5% and the Nikkei 1.6%; in the currencies the greenback has seen a flat start with the DXY up just 0.1%; however the euro has gained strongly against the yen, currently up 1.1%. Other Manufacturing PMI gauges are scheduled today from the EU, UK and US; other data includes Eurozone Unemployment and US Construction Spending. Gold has opened lower this morning in reaction to the US debt deal news and is currently off 0.8% from Fridays close; in contrast the PGMs have seen a more upbeat start with both platinum and palladium up 0.6%. Despite the pullback in gold this morning there still remains some pessimism that the deal could fall at the last hurdle, but given the scale of gains posted in recent weeks the yellow metal is vulnerable to a deeper correction should the deal be given full approval. Initial support is expected around $1590-1600 however the metal could test back to the 50-DMA around $1550.

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