The commodity sector firmed last week with precious metals turning in the best performance on high hopes of further monetary easing from the Fed. Gold prices charged North with important near-term resistance cracked. The Fed's August minutes were "Dovish", indicating further monetary easing is highly likely. As the minutes indicated that many members believed that more monetary easing measures should be implemented soon unless upcoming economic data showed "a substantial and sustainable strengthening" in economic recovery. Further monetary easing is now a matter of "when", instead a matter of "if". PGMs soared as driven by supply disruption in South Africa. Labor strike in Platinum mines operated by Lonmin has tendency to spread to other mines and the supply/demand balance will be affected. However, we expect surplus will remain this year. Rally in Crude Oil prices paused after gaining over the past few weeks. Sanctions over Iran and maintenance in a North Sea field are raising concerns over supply problems. On the demand side, both OECD and non-OECD demand appeared to grow in Q-3, together these led to recent strength in Crude Oil prices. The WTI-Brent narrowed last week but remained in the double-digit territory. Debate is on whether the spread will widen further in coming months. LTN believes that further widening looks unlikely as factors sending Brent Crude Oil prices higher have priced in while the situation in WTI Crude Oil is not as poor as seen. Yet, we expect the spread will continue to hang around current levels.
