GOLD:
GOLD MARKET FUNDAMENTALS: Provided Fed Charmain Bernanke's comments today don't take a hawkish stance, the gold market may get a lift off of higher oil prices today. The gold market seemed to sag yesterday despite soft US economic readings, and with the US Dollar not falling in the wake of the soft readings, the bull camp was even more disappointed. The gold market initially showed negative divergence in the wake of silver gains and that typically shows a lack of conclusive opinion in metals and can sometimes hint at ongoing weakness. With the gold market also not responding favorably to potential flight to quality threats from North Korea and Iran, it was clear that the typical bull contingent wasn't exactly waiting on the sidelines to buy gold on weakness. However, gold has been showing a positive correlation with the oil market, especially since weak oil caused it to break over the last two weeks. With the crude market up on hurricane concerns, gold ought to get a lift today. In fact, if lower oil made silver rally and gold break, we might see correction in the spread today. Silver and copper also have to be undermined due to slack US economic readings yesterday. The trade seems to be counting on the Fed Chairman taking a dovish stance towards interest rates in his speech today, betting on on soft dollar and some strength to the precious metals. With anticipation this consistent, we don't expect a bullish surprise coming out of the talk, and perhaps the market is more vulnerable to a negative reaction. However, the crude oil market is up on Hurricane concerns, which may also provide a temporary lift. Slack economic data may keep rates down, but it is not very supportive to demand indicators nor to inflationary concerns, and this ultimately could undermine the bulls. 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: The silver market gained overnight despite strength in the dollar, possibly on expectations that the Fed Chairman's speech today will not suggest rate hikes are in the near future. Higher oil prices today, which may support gold, could undermine silver and spark some unwinding or profit taking on gold/silver spreads. Yesterday's slack economic news was disappointing to the market, and while the silver bulls waged a good fight in the first half of the trading session Thursday it was clear that sagging gold and copper prices and slowing economic evidence was serving to trip up the market into mid session and into the afternoon action the selling seemed to intensify. The silver charts are looking slightly less positive than yesterday and are taking a more sideways stance. Key resistance comes in at tops at 12.85 and 12.86.

METALS TECHNICAL OUTLOOK 8/25/2006

COMEX SILVER (SEP) 08/25/2006: The daily stochastics have crossed over down which is a bearish indication. Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. The market's short-term trend is positive on the close above the 9-day moving average. The market setup is somewhat negative with the close under the 1st swing support. The next downside target is 1205.5. The next area of resistance is around 1247.0 and 1269.5, while 1st support hits today at 1215.1 and below there at 1205.5.

COMEX GOLD (DEC) 08/25/2006: Daily stochastics are trending lower but have declined into oversold territory. The market's short-term trend is negative as the close remains below the 9-day moving average. The close below the 1st swing support could weigh on the market. The next downside target is 622.0. The next area of resistance is around 632.5 and 638.0, while 1st support hits today at 624.5 and below there at 622.0.