Gold and Treasury glittered while stocks and commodities (except for precious metals) fluctuated between gains and losses as further evidence of US slowdown reduced risk appetite but the weakness may trigger the Fed to implement more stimulus measures. Overall market sentiment remains vulnerable.

Economic data released in the US was again disappointing. NAHB housing market index fell to a 17-month low of 13 in August from 14 a month ago. The market had anticipated an improvement to 15. Empire State Manufacturing Index climbed to 7.1 in August from 5.08 in July but it was below consensus forecast of 8.25. Headline TIC flow data was strong with inflowing jumping to 44.8B in June (consensus: 36.3B) from 35.4B in May. However, China’s holdings of long-term Treasuries fell for the first time in 15 months, dropping by 21.2B to 839.7B, while the overall Treasury position fell for a 2nd month to 843.7B. Decline in US yields has made investments more expensive.

Wall Street plunged as the data revealed weakness in the US economy but DJIA and S&P 500 Indices managed to recoup most of the losses and ended the day flat amid anticipation that the Fed will adopt additional unconventional easing measures to stimulate growth. Treasuries, on the other hand, continued to soar and the 10-year bond yields plunging to a 17-month low.

Gold price rose for a third day. The benchmark contract gained +0.79% to settle at 1226.6, the highest level since July 1. Apart from its safe-haven appeal, gold also benefits from decline in USD. Looking at the June TIC data, although long-term inflow of funds jumped as sovereign crisis in the Eurozone in May had driven investments to the US, foreign capitals mainly flew to Treasury and agency bonds. Outflows were seen in US equities and corporate bonds. If outflows continue in these areas, together with slowdown in purchases in other areas, the dollar should be under pressure and this should push gold higher.

Crude oil changed little with price trading below 76 throughout the day. Given the high correlation with stock markets, price movement was in synchronization with that of equities. The front-month contract for WTI crude oil ended the day at 75.24, largely unchanged from Friday’s close.