GOLD:
GOLD MARKET FUNDAMENTALS: While there continues to be bargain hunting buying talk circulating in the Press, and there was a fleeting bargain hunting/technical bounce yesterday morning, the gold market just doesn't seem to be presented with a long list of reasons to aggressively seek a bottom. Certainly the front page story on the Wall Street Journal this morning, suggesting that sharply lower oil prices will probably lead to stronger growth ahead is somewhat supportive, but apparently the spec and fund players in the gold market is still unwilling to stand up against the current and ongoing liquidation wave. In fact, even with one economist suggestion that the sharp slide in oil "could" add as much as.7% to GDP late in the year, the trade this morning seems to be un-moved. Therefore, it could take significantly lower oil prices and a more distinct economic optimism just to make gold attractive again from a physical commodity perspective. From the supply front, there was some talk overnight that the sharply lower price of gold might actually inspire Central Banks to buy gold instead of selling gold and that is a distinct change in a recent story line. With the $600 level violated yesterday, some in the trade are now looking to the next significant level on the charts of $575 and unless there is a distinct change in the headline flow, it would seem like fund long liquidation efforts will tend to dominate the gold markets focus. While the $587 level might serve as a weak form of support on the charts, we can't rule out a further slide to $575. Certainly the overall macro economic outlook is being improved with the sharply lower oil prices, but without definitive direction from the Dollar, and bargain hunting buying the market doesn't seem to have the capacity to turn off the selling. Certainly the fund long position is being quickly reduced and the momentum of the downside should begin to slow but until there is a definitively bullish theme for the market to embrace, there is no reason to get in a hurry to pick a bottom. In fact, until the industrial metals or the equity markets are convinced of stronger growth ahead and or the bargain hunting buyers show up in force, the gold market probably has more reason to decline than to rise.

SILVER:
SILVER MARKET FUNDAMENTALS: Like the gold market, the flow of bullish supply and demand news in silver has been minimal at best. Apparently the sharp decline in oil prices (which initially means lower inflation and flight to quality interest in silver) is not being seen as a big benefit to the world economy yet. In fact, without the hope for improved physical demand in silver off a resurgent economy, the liquidation mentality might remain in place and that in turn could continue to force funds from long positions. However, the speculative long position in silver wasn't nearly as long as the gold market in recent reports and that could mean that the speculative long liquidation effort in silver could run its course quicker than in the gold market. Some in the trade have suggested that the even number $11.00 level on the charts stands a decent chance of supporting prices today, but in looking at outside market action overnight, the bear camp really hasn't seen much to threaten their positioning. In fact, with the exception of the sharp rally in the equity market yesterday, there really isn't much in the way of fundamental support for the bull case in silver. With December silver falling down to the next lower chart support level just above the $11.00 level and the rest of the metals markets remaining under pressure, the bias in the market remains down. However, as suggested before, it is possible that the net spec positioning in the silver market has shifted into a net short positioning and that could begin to slow the rate of decline in prices. However, the bull camp needs a shift to a much more optimistic economic outlook or the declining inflation/softening growth mentality will continue to pressure prices even lower. In conclusion, the bias in prices looks to remain down for at least another session.

METALS TECHNICAL OUTLOOK 9/13/2006

COMEX SILVER (DEC) 09/13/2006: Momentum studies are declining, but have fallen to oversold levels. The market's short-term trend is negative as the close remains below the 9-day moving average. The market's close below the pivot swing number is a mildly negative setup. The next downside objective is 1088.5. With a reading under 30, the 9-day RSI is approaching oversold levels. The next area of resistance is around 1130.0 and 1152.5, while 1st support hits today at 1098.1 and below there at 1088.5.

COMEX GOLD (DEC) 09/13/2006: Daily stochastics are trending lower but have declined into oversold territory. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market tilt is slightly negative with the close under the pivot. The next downside objective is 587.2. The market is approaching oversold levels on an RSI reading under 30. The next area of resistance is around 598.8 and 605.1, while 1st support hits today at 589.8 and below there at 587.2.