Precious metals regained support yesterday as the US dollar slipped against the euro - prompting investors to increase demand for alternative assets to hedge against the greenback's decline. This came amid a better-than-expected, albeit still negative, German Zew economic sentiment index statistics. The index slipped to -55 against market expectations for a decline to -62. Furthermore, US PPI surprised on the upside, rising 1.2% m/m against market expectations for a 0.6% m/m increase. Following this, the greenback slipped to $1.4792 against the euro during the New York trading session, from a high of $1.4636 during the Asian session. Given that the dollar has appreciated rapidly over the past few days, this correction was expected. Precious metal investment sentiment should be cautious today as investors seek further clues on the euro - which could expose the metals to downside potential throughout today.

The greenback's decline supported crude oil prices to the upside, which saw WTI crude oil prices ratchet from $111/bbl in Asia to $116.72/bbl during the New York session - supporting investment fund flows into precious metals. Oil prices should remain well supported today, as markets expect a 3 million barrel w/w decline from the US DOE gasoline inventory statistics report today - which would be an indication of robust crude oil demand in the US. This should lend further support to precious metals throughout today.

We note that investment grade credit spreads in the CDX index suite have widened. With develop market equity markets struggling to achieve consistent gains, crude oil price volatility, coupled with currency market uncertainty, should focus investors' attention on precious metal market developments.

Gold opened at $799 in Asia and then slipped to $783 in early London trading before climbing to $788 at the PM fix. The metal was range-bound between $796 and $786 in early New York trading before rallying to $811 at the close. Support for gold is at $796, with $775 - $743 providing secondary support. Primary resistance is at $828 - $839, and secondary resistance at $871.