GOLD:
GOLD MARKET FUNDAMENTALS: From Australia this morning, the Australian Dollar reportedly declined overnight off fears that demand for commodities would begin to slow, possibly because of slower growth and possibly because prices for some commodities are expected to dampen demand. Even the US Fed mentioned the risk that commodity prices might serve to keep the inflation threat present in the face of slowing and that would seem to point to stagflation. In a slightly negative note this morning, Gold Fields Ltd has suggested that gold prices will hold current levels in the near term, but in the "long run" gold prices will eventually trade back to fair value levels and that serves to countervail the bullishness that was generated early in the week off the idea that most gold producers were going to continue paring back hedge coverage in hopes of securing higher sales prices. While the Gold Fields Ltd executive Vice President was apparently talking about a "long term" equilibrium price for gold of $475, that price is certainly shockingly low for many in the marketplace, especially considering that some players had been hoping for a near term rise above $700. However, the recent Gold Fields dialogue wasn't all bearish, with the company also predicting that investment demand for gold looked to be very entrenched and that investment demand should provide support to gold prices significantly above those aforementioned longer term fair value levels. In a positive development, a large Securities firm has raised its "buy price" suggestion on Kinross gold and that would seem to hint at ongoing bullishness for the fundamentals of that company and in turn the gold market. However, the bear camp does seem to have an early grip on prices and that tilt appears to be coming from the idea that the Fed over tightened and that both growth and inflation might be set to contract in the coming months as the US economy works its way out from under the excess management of the Fed. With the market starting the session out on a weak note and the outside market impact either insignificant or slightly bearish, we have to give a near term edge to the bear camp. Close-in support on the charts is seen at $642.2 and perhaps down at $634 in the event that the slowing growth mentality is enhanced by ongoing weakness in equity prices. We continue to think that position players should consider the December a value around the $643 level, but fresh longs might have to risk the position to at least $624 because of the residue of the Fed!

SILVER:
SILVER MARKET FUNDAMENTALS: While the copper market is attempting to separate itself from the precious metals weakness in the early going, there seems to be a negative cast over the industrial and precious metals this morning. In fact, overnight the September silver contract managed an aggressive washout down to $11.91, but the market did manage to reject that slide and return to the vicinity of the prior closing value. Many traders are suggesting that the silver market is set to track the stock market and perhaps the copper market and that could make the moderate overnight declines in the gold market less significant. In fact, as long as the financial markets toss around the idea that the Fed might have over tightened, it is possible that silver prices will trade with a feeling of psychological resistance overhead. Recent exchange stocks data fails to give a solid clue on the direction of prices, as silver exchange stocks have come right back to sit right on key psychological levels. Some traders were emboldened by the fact that September silver managed to reject the overnight attempt to push silver below the 100 day moving average at $11.97, while others suggested that critical trend lines were also respected last night at $11.91. While the market acted like it was capable of turning off the selling pressure overnight, the overall feel of prices this morning hints at a bit of bearish control. In fact, with the silver market conflicted between precious metals/financial considerations and physical commodity fundamentals, it is possible that prices will soften until enough fresh demand comes off the sidelines to turn around the tide of selling that has been in place since the August 4th high. Some traders are suggesting that the big spike down reversal last night was indeed a critical bottom, but we think that the Fed influence might take another session or two to wash out before a total turn in prices is accomplished.

METALS TECHNICAL OUTLOOK 8/9/2006

COMEX SILVER (SEP) 08/09/2006: Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The market's close above the 9-day moving average suggests the short-term trend remains positive. It is a slightly negative indicator that the close was under the swing pivot. The near-term upside objective is at 1245.8. The next area of resistance is around 1236.5 and 1245.8, while 1st support hits today at 1215.5 and below there at 1203.8.

COMEX GOLD (DEC) 08/09/2006: Rising stochastics at overbought levels warrant some caution for bulls. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market tilt is slightly negative with the close under the pivot. The near-term upside target is at 662.9. The next area of resistance is around 660.5 and 662.9, while 1st support hits today at 654.1 and below there at 650.0.