GOLD:
GOLD MARKET FUNDAMENTALS: With the Treasury market posting a massive upward thrust last week and the US equity market also forging a surprise setback last week, it is clear that the financial markets are still factoring a moderate threat of sustained slowing ahead. With the ongoing slowing threat, a surprisingly lack of geopolitical tensions and only minor support from recent weakness in the Dollar, the bear camp in gold would seem to maintain an edge. In fact as mentioned before, the Press is aggressively touting an ongoing liquidation wave in commodities and with the oil market leading the way down again this morning, it would certainly seem like the trade is embracing the negatives of the oil slide, instead of the potential positive economic ramifications of lower retail energy prices. In a positive note, some Press outlets are suggesting that European Banks will reduce sales of gold and that could lend some badly needed support to a market that is facing a number of bearish themes. The reduced Central Bank sales item wasn't the only element providing support to prices overnight, as a Russian newspaper overnight carried a story about renewed Indian jewelry buying. However, the gold market might also be confronted with concerns of rising Euro zone interest rates, as the trade parses through comments from the ECB President Trichet later today. In short, the negative items seem to outweigh the positives, and the trend of bearish sentiment seems to be hovering in the background. With the September 19th Commitment of Traders with Options report showing the Gold Non-Commercial position to be still net long 69,393 contracts and the Non-reportable position also net long 27,857 contracts, it is clear that the market remains technically vulnerable to more selling pressure. With the outside market influences mostly bearish for the market and the December gold contract sitting roughly $6 above the September lows, the market does seem to be a bit vulnerable to more selling, especially if the macro economic outlook remains slack. We see a trading range today of $584.1 to $601.7, with the Indian demand hope the lone factor capable of providing a badly needed underpin for gold prices over the coming weeks. However, in order to see a definitive bottoming in gold prices, this market needs a vastly improved macro economic outlook or significantly more geopolitical uncertainty than is currently being encountered.

SILVER:
SILVER MARKET FUNDAMENTALS: After an impressive upward thrust late last week, the December silver contract comes into the action this week somewhat back on its heels. In fact, with the copper market under moderate pressure and the metals markets in general unwilling or unable to garner optimism from the sharp ongoing slide in oil prices, it would seem like the bears maintain an edge in the marketplace. While the gold market is seeing periodic talk of rising physical demand, the silver and copper markets are not seeing the same type of favorable demand talk. In fact, with the markets expected to get more negative news from the US housing sector this week, it would seem like most outside market forces are pointing to lower silver prices ahead. However, the silver market might be indirectly supported by a favorable start to the week in the equity market, but to see industrial or physical demand talk in silver seems to require a much more optimistic view toward the future. The September 19th Commitment of Traders with Options report showed the Silver Non-Commercial position to still be net long 13,947 contracts, with the Non-reportable position also net long 19,546 contracts for a combined spec and fund long position of 33,000 contracts. In fact, with silver prices coming into the action this morning above the level where the COT report was measured, one has to conclude that the silver market remains vulnerable to more long liquidation, especially if the macro economic condition continues to deteriorate. Near term downside targeting in the December contract is seen at $10.93 and perhaps even $10.81 in the event that slowing dominates thinking throughout the coming week!

METALS TECHNICAL OUTLOOK 9/25/2006

COMEX SILVER (DEC) 09/25/2006: The stochastics indicators are rising from oversold levels, which is bullish and should support higher prices. 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 target is 1164.4. The next area of resistance is around 1147.3 and 1164.4, while 1st support hits today at 1114.8 and below there at 1099.4.

COMEX GOLD (DEC) 09/25/2006: The daily stochastics have crossed over up which is a bullish indication. The stochastics indicators are rising from oversold levels, which is bullish and should support higher prices. The market's short-term trend is positive on the close above the 9-day moving average. Market positioning is positive with the close over the 1st swing resistance. The near-term upside objective is at 602.7. Short-term indicators suggest buying pullbacks today. The next area of resistance is around 599.4 and 602.7, while 1st support hits today at 591.4 and below there at 586.7.