Precious metals are likely to open flat after a strong set of gains yesterday as geo-political factors dented sentiment in global markets. Geopolitical tension has ramped up following the escalation in war-like rhetoric between US and North Korea. While a fullfledged conflict is unlikely, some risk premium has built up in global assets. On the upside, better US labor market data will limit gains. US worker productivity rose more than expected in the second quarter, rising 0.9% but wage growth remained lower at 0.6%.

Base metals continue their bull run with LME copper and aluminium rising to 2-1/2 year highs on expectations of output cuts in across many commodities in China during winter. China's Shandong province has ordered 3.21 million tonnes of aluminium smelting capacity to be shut, more than previously expected, as Beijing intensifies efforts to curb pollution in its bloated heavy industries. An earthquake in China's Sichuan province has increased risk of disruption to some mine supply from region; on other hand, metals demand prospects have improved due to reconstruction activity. China's top aluminium foil producers are preparing legal defence challenging preliminary U.S. ruling that would impose hefty penalties on imports from China. 

Crude oil is likely to open flat after closing higher yesterday as US inventory data supported prices. EIA data showed that US oil inventories declined by 6.5 million barrels and US oil production fell slightly last week. Oil inventories are now down over 58 million barrels from their peak in March. Gasoline demand remained near record highs but stocks unexpectedly rose by 3.4 million barrels. Further cuts in exports by Saudi in September coupled with hope of better compliance from Iraq has also kept prices supported on the downside