WTI crude oil recorded first slide after 5 consecutive days of rise yesterday. The benchmark contract plummeted to as low as 51.86 just ahead release of inventory data. The gauge then rebounded strongly to above 54 before retreating to settle at 52.77 (-2.2%) for the day.

The US Department reported a 3.3 mmb gain in crude inventory due to 0.204 mmb rise in imports and 45k b decline in refinery runs for the week ended Mar 20. This was higher than market expectation of 1.1 mmb increase. For refinery products, both stockpiles for gasoline and distillate dropped by 1.14 mmb and 1.58 mmb respectively.

While some of the market players viewed draw in product inventories as positive, we disagreed. For gasoline, we do think the 1.14 mmb drop in stockpile as slightly supportive as it's driven by increase in demand and healthy import level. However, for distillate the higher-than-expected draw was more due to sharp output cuts by refiners. This was also a reason why crude inventory rose by 3.3 mmb. A good news from yesterday's report was the 2.21 mmb fall in Cushing stockpiles as lower storage helped easing the contango situation of WTI contracts.

Movement in gold price remained choppy as outlook has been mixed by weakness in the dollar and strength in stock markets. After plunging to 916, the April contract recovered to 942 before closing at 935.8 Wednesday.

Investment demand on gold is still robust. Assets holdings in SPDR rose to 1124.99 metric tons on Mar 25. The ETF trust has the world's 6th largest reserve of bullion, just behind 2451.8 metric tons held in Italy.

The dollar had volatile movement against the euro yesterday as led by China's call for a new reserve currency and later by Treasury Secretary Geithner's comment on the issue. The dollar plummeted as much as 1.3% against the euro after the Treasury Secretary said that the US is open to the IMF's use of special drawing right to 'create' a new reserve currency. However, the gauge recovered after Geithner said he predicted no change in USD's role in the future.

We expect the dollar's volatility will continue next week as China will very likely bring up this topic in the G20 summit next week. The market has been concerned about depreciation in the dollar, in particularly after the Fed announced to purchase up to $300B Treasury securities and $1.45 trillion MBS and agency debts last week. We are bullish on gold's outlook in the long term given the inverse relationship between the dollar and gold.