GOLD:
GOLD MARKET FUNDAMENTALS: From the initial sweep this morning it would seem that the gold market is being presented with more bearish headline developments than supportive headlines. In addition to fresh confirmation of rising Chinese gold production (+9% in the January through June time frame) the market was also presented with ongoing dialogue about a significant mine expansion effort by Gold Fields in South Africa. While the mine expansion was known in the action yesterday, the trade is seeing the details of an effort to "go deep" and hopefully increase production by as much as 10.8 million ounces. In fact, Gold Fields plans to invest up to 4.7 billion rand in the project and that is projected to extend that particular production into the year 2035. On the other hand, the gold market still is viewed in a positive light by analysts and a major brokerage firm is once again predicting further gains in gold because of their forecast for a falling Dollar. It is possible that today's US scheduled numbers will provide the Dollar with some selling pressure and with the front page of the Wall Street Journal this morning covering the recent sharp rise in unit labor costs and trumpeting several other various inflation threats, the gold market would seem to have some potentially supportive elements operating in the background. However, the technical setup this morning (at least in the early going) looks a little vulnerable and the rest of the metals markets are also starting out on a weak footing. The recent strong upward thrust leaves the overall control of the gold market with the bull camp but the overnight action in December gold leaves the market vulnerable to a weak slide in prices. In fact, unless the wholesale trade report from the US applies some pressure to the Dollar and in turn supports gold in the early going, it is possible that December gold sees some additional profit taking selling and drifts down to $638 support on the charts.

SILVER:
SILVER MARKET FUNDAMENTALS: While the silver market showed some resilience on Wednesday directly in the face of gold market weakness, the silver market comes into the action this morning holding just above the two prior sessions closing levels. Given a positive correlation to the equity market over the last week, it is possible that the persistent slide in equities from this week's highs is serving to undermine investment interest in silver. With copper and platinum prices somewhat lower early in the session and the trade somewhat downbeat on the US and global macro economic outlook, it is not surprising that silver is throwing off signs of profit taking by the long camp. However, the silver market hasn't exactly seen much in the way of supportive physical demand headlines and that has left the longs searching for a theme to support prices after a stellar $1.18 per ounce run up off the late August lows. In short, the market seems to have a positive bias but the trade is having difficulty dredging up items to drive prices even higher. Given the wide ranges of the last two sessions and the apparent interest in the lower portion of this week's trading range, it would seem like December silver is capable of sliding back to $13.05 support on the charts. Unfortunately trend channel support in December silver comes in all the way down at $12.28 but that trend line is rising by almost 5 cents per day!

METALS TECHNICAL OUTLOOK 9/7/2006

COMEX SILVER (DEC) 09/07/2006: Rising stochastics at overbought levels warrant some caution for bulls. The market's short-term trend is positive on the close above the 9-day moving average. The daily closing price reversal up is a positive indicator that could support higher prices. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next upside target is 1347.0. The next area of resistance is around 1333.0 and 1347.0, while 1st support hits today at 1307.1 and below there at 1295.1.

COMEX GOLD (DEC) 09/07/2006: The market back below the 40-day moving average suggests the longer-term trend could be turning down. Momentum studies are trending higher from mid-range, which should support a move higher if resistance levels are penetrated. The market's close above the 9-day moving average suggests the short-term trend remains positive. The market setup is somewhat negative with the close under the 1st swing support. The near-term upside target is at 648.9. The next area of resistance is around 644.8 and 648.9, while 1st support hits today at 638.8 and below there at 636.9.