The bulls continued to lead the metals sector higher Wednesday as further safe-haven demand was seen in gold while the base metals rose a net 3% as heightened near-by tightness in copper and upbeat manufacturing PMI readings from China, the UK and US prompted buying interest across the sector.

Commodities as a whole saw an upbeat day as positive data and speculation of more hawkish action by the ECB tomorrow led to a rise in risk appetite, albeit tentatively. The CRB Index rose by 2.5% while the euro was able to recoup Tuesday’s losses against the dollar, closing up 1.1%. Equity sentiment was also buoyant as the Dow and S&P500 both gained 2.1%.

Europe will likely be a key focus for the financial markets today with EU PPI and Revised GDP readings scheduled for release. But more importantly the ECB will set interest rates and ECB President J-C Trichet will carry-out its press conference where investors will be looking for signs of more aggressive action towards Spain and Portugal and for reaction to the apparent US pledge to extend the European Financial Stability Facility via an extra commitment of funding from the IMF.

In the base metals copper was again the driver as the cash/threes spread widened to its deepest backwardation since October ’08. The complex gained a net 3% on high turnover as copper traded above $8600/t and aluminium cleared $2300, and given the proximity to year-end and ongoing development of Exchange Traded Funds the sector and particularly copper will remain sensitivity to supply disruptions and signs of a possible squeeze.

In the precious metals gold flirted with $1400/oz as safe-haven interest continued to emerge; silver hit a high of $28.85 while platinum and palladium posted solid double-digit gains. The short term outlook remains mixed given the volatility seen across the financial markets, however, growing anxiety amongst investor and the recent up-tick in geo-political tensions continues to draw investors towards the traditional safe-haven assets and we expect gold and also silver to maintain their long-term up trends.

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