GOLD:
GOLD MARKET FUNDAMENTALS: While the gold market didn't specifically earmark fresh buying interest from the Asian market, reports of Asian interest in copper seems to have rekindled hope of renewed gold buying. In fact, the renewed Asian interest was seemingly started in the Canada Press and then spread to the Asia markets, where silver and platinum were both directly benefited in the wake of a massive, apparently demand driven copper rally. In a partially negative note, South African newspapers carried a story indicating that second quarter gold production rose 1% (as compared to the first quarter) but offsetting that news was the previously known fact that the second quarter production for 2006 was 6.4% below the year ago tally. In a positive note, the Bureau of Indian Standards apparently moved to simplify gold hallmarking rules and that has apparently sparked an explosion in the number of jewelry licenses applied for in that country and that might point to overall gold jewelry demand growth ahead in India. In a somewhat neutral Press story overnight, London traders have indicated that they are not seeing much in the way physical evidence of any Central Bank sales activity in gold and some players are seeing that pattern as supportive to gold prices. On the other hand, dealers and players have also suggested that evidence of central bank sales activity can go undetected. On balance, the demand side of the equation seems to be benefiting the bull camp and apparently outside market negatives are mostly being discounted this morning. With a new high for the move overnight, December gold reaches the highest level since August 23rd and with the trade seemingly fixated on a "renewed physical demand" theme we suspect that lower oil prices, a steady Dollar and marginally higher equity prices might be seen as supportive. In fact, with the market off the Dollar focus for the time being and potentially off the inflation and flight to quality focuses, the most supportive environment for gold prices might be one in which the outlook toward the economy is thought to be improving. However, the August 29th Commitment of Traders with Options report showed the Gold Non-Commercial position to be net long 84,059 contracts, with the Non-reportable position also net long 33,521 contracts, for a combined spec and fund long position of 117,000 contracts. With the market has managing a gain of $17 per ounce since that report was measured the gold market is certainly progressing toward an overbought status. However, with a mostly positive environment and little overhead resistance until $640 level we suspect that the bull camp will be able to control prices in the coming sessions.

SILVER:
SILVER MARKET FUNDAMENTALS: With the copper market in a significant upside thrust to start out the new trading week and all of the precious metals markets in a coordinated upside breakout, it would seem that the market is poised to start the week out on a positive note. In fact, with the overnight gap higher move, December silver has reached the highest level since May 30th and that gives off the impression of a move to an even higher trading zone. Apparently physical silver buying interest surfaced in Asian markets, with a Canadian publication specifically pointing to copper, silver and platinum buying by the Chinese. In short, the market seems to be in favor from a demand perspective and that could mean that lower oil prices and higher equity prices are actually beneficial to silver, as that could facilitate even more buying in the future. Apparently there was talk that relatively large ongoing ETF holdings have also re-inspired silver buyers, as strong investment holdings seem to project even tighter supply and demand conditions ahead in all global silver markets. Some traders have suggested that December silver has little resistance until the $13.50 level, while others suggest there is little resistance on the charts until the even number $14.00 level. With a gap up trade overnight and positive leadership throughout the metals complex, there would seem to be little to prevent the market from forging consistent gains ahead. In fact, with the August 29th Commitment of Traders with Options report showing the Silver Non-Commercial position to be net long 24,840 contracts and the Non-reportable position net long only 21,521 contracts, the combined spec long is only 46,000 contracts and that isn't even half of the record spec long of 97,000 contracts posted back in March of 2004. In other words, the silver market retains buying capacity and seems to have a solid fundamental story to facilitate more buying ahead. With little in the way of resistance until $13.50, we suspect that the market will continue to rise in the coming 24 hours.

METALS TECHNICAL OUTLOOK 9/5/2006

COMEX SILVER (DEC) 09/05/2006: Momentum studies are trending higher but have entered overbought levels. The close above the 9-day moving average is a positive short-term indicator for trend. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next upside objective is 1329.1. The next area of resistance is around 1320.8 and 1329.1, while 1st support hits today at 1293.3 and below there at 1274.2.

COMEX GOLD (DEC) 09/05/2006: Stochastics are at mid-range but trending higher, which should reinforce a move higher if resistance levels are taken out. The market's short-term trend is positive on the close above the 9-day moving average. The market tilt is slightly negative with the close under the pivot. The near-term upside objective is at 637.5. The next area of resistance is around 635.5 and 637.5, while 1st support hits today at 629.7 and below there at 626.0.