GOLD:
GOLD MARKET FUNDAMENTALS: While the gold market is giving off very little direction in the early going today, the market might be supported by talk Chinese buyers were active overnight and that some early demand from the Indian wedding season was prompting increased physical buying interest in India. However, South Africa's 4th largest gold miner indicated that they were planning to raise 4th quarter gold production by 2% and that will apparently follows a 4% increase in the 3rd quarter and that might seen as a minor negative for gold prices today. With the overnight talk of increased international physical demand, the gold market might be cushioned against the flow of weak macro economic news from both Germany and the US today, which is generally expected to show a softening of growth rates. Some analysts think that new homes sales readings this morning could be moderately weak and that could turn up the concern of significant slowing in the US economy but it isn't a given that slowing fears will automatically translate into a bearish view for gold, as the gold market has periodically thrown off the slowing mantle and has managed to benefit from a resurgence of flight to quality buying interest. In fact, the German Ifo readings this morning were contractionary, but officials in Germany somewhat cushioned the negative impact from those numbers, by predicting that the numbers were not expected to fall off sharply in the months ahead. In another potentially supportive development yesterday, protestors in Lima are apparently causing trouble at a mine, with police forcibly clearing a blockade. With the failed rally yesterday and the potential for slack economic information this morning, we suspect that the gold market will get some support from the US Dollar today, but that support might simply be countervailed by slack energy price action and fears that industrial and jewelry demand for metals might be pinched in a global slow down. In short, the conditions seem to project sloppy to sideways and perhaps even lower pricing ahead. However, the December gold contract appears to have pretty solid support above the $625 level. Those that get long December gold at current levels probably have to risk positions to a close below $616.5 and those that are long and have options coverage against their longs, should continue to hold that protection.

SILVER:
SILVER MARKET FUNDAMENTALS: While the market seems to be emboldened by recent attempts to rally and prices have remained close to an upside breakout point on the charts, the market seems to lack a definitive bullish theme. Furthermore, the outside markets of platinum and copper are also exhibiting back and forth action despite fundamentals stories that would seem to justify higher prices. Therefore it is possible that slackening economic readings are holding back silver from forging more gains on the charts. In fact, in looking at the fundamentals in silver, there has been very little fresh news, but according to technical traders, the charts in silver have a fairly positive classical appearance. As suggested already the silver charts are positive with higher lows and periodically higher highs. Therefore we have to concede control to the bull camp but this market will probably remain susceptible to sudden failures down to support levels on the charts. In fact, with a slightly better flow of US numbers today and a weaker US Dollar, it wouldn't be surprising to see the September silver contract manage to rise to and above the August high of $12.722.

METALS TECHNICAL OUTLOOK 8/24/2006

COMEX SILVER (SEP) 08/24/2006: The daily stochastics gave a bullish indicator with a crossover up. Positive momentum studies in the neutral zone will tend to reinforce higher price action. A positive signal for trend short-term was given on a close over the 9-bar moving average. Follow through buying looks likely if the market can hold yesterday's gap on the day session chart. The market's close above the 2nd swing resistance number is a bullish indication. The near-term upside objective is at 1278.9. The next area of resistance is around 1264.3 and 1278.9, while 1st support hits today at 1238.8 and below there at 1227.9.

COMEX GOLD (DEC) 08/24/2006: Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The market's short-term trend is negative as the close remains below the 9-day moving average. The downside closing price reversal on the daily chart is somewhat negative. It is a slightly negative indicator that the close was under the swing pivot. The next downside target is 625.7. The next area of resistance is around 637.3 and 642.8, while 1st support hits today at 628.7 and below there at 625.7.