GOLD:
GOLD MARKET FUNDAMENTALS: With the gold market somewhat factoring in the view that Central banks failed to sell as much gold as was allotted, (today is the official year end for the annual sales agreement) the gold market might be able to confirm that sales actually came in below the prescribed limit. In other words, if the market were able to confirm that Central Banks are generally in a position of holding gold, that could provide a badly needed offset to the broad based commodity fund selling wave that has been in place for the last month. With news overnight of a 0.4% decrease in January through August Russian gold production, the gold market sees another minor supportive supply development. However, a large portion of the gold market still seems to be looking to the direction of oil prices as a guide to the direction of gold prices. In other words, the bulls are hoping that the reversal in oil prices yesterday will be sustained and that will in turn give gold a badly needed investment boost. While there is still some residual support in the gold market off the Indian festival season theme and the market also continues to see a series of minor gold consolidation moves in the Press overnight, the gold market thus far is only getting tacit support from new developments. However, it should be noted that Indian newspapers are pointing out a potential two week wait for delivery of gold and jewelry purchased for the Diwali festival and that in turn might prompt a concentration or acceleration of Indian buying interest, as buyers attempt to secure their needs in a timely fashion. In fact, some Press outlets overnight are expecting support for gold from increased sales into Ramadan, with estimates out of Dubai calling for a 15% to 20% increase in gold purchases through the Muslim holy month. With a slight higher high today and signs that the gold market is apparently capable of discounting a series of minor outside negative market developments, it would seem like the gold market is throwing off a bit of the patently bearish psychology. However, until the market sees a slightly more upbeat macro economic outlook, we doubt that the physical buying interest and the investment interest is going to truly turn the tide on the sellers. However, it is interesting to note, that the market is expecting a slight improvement in some consumer confidence readings today and that could further the slightly upbeat tone present in the early action today. With hope of buying support from two different global holidays ahead, it is possible that December gold manages to forge a rise above $600. On the other hand, the technical setup seems to offer significant overhead resistance on the charts and it doesn't appear as if the stock market is telegraphing consistently better times ahead. In conclusion, expect less selling dominance and a minor attempt to bounce.

SILVER:
SILVER MARKET FUNDAMENTALS: After mostly lagging behind the strength seen in other precious metals markets yesterday morning, the silver market continues to hold under last week's high. It would seem like the macro economic tilt today could temporarily improve off an up tick in the Consumer Confidence readings but it is probably unlikely that the silver market will see conditions improve so much that the deflationary or slowing growth mentality will be totally thrown off. In fact, in the early action today, the platinum market is weaker and copper prices are higher and therefore it would seem like sentiment is still generally disjointed. With a moderately large increase in exchange stocks overnight and the most recent COT report readings showing the silver market to still be net spec long, there is certainly some headwinds for those that think prices are set to rebound. In fact, some traders are suggesting that the consolidation zone at $11.52 is probably set to offer up moderate resistance to the market in the coming sessions. As suggested before, the December silver might have heavy resistance up at $11.52 but close-in support looks to have firmed up around the $11.13 level. The 200 day moving average comes in today at $11.23 and we can't rule out the prospect for a light bounce, but we are not sure that the macro economic cloud has lifted enough, to allow for a total restart of the bull trend in silver. In our opinion, it's the economy that remains a impediment to the silver bulls case but today's, Consumer Confidence readings from the US might temporarily remove the economic resistance, but a persistent improvement in the numbers if probably needed to fully shift the pendulum away from the downside.

METALS TECHNICAL OUTLOOK 9/26/2006

COMEX SILVER (DEC) 09/26/2006: 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. The upside daily closing price reversal gives the market a bullish tilt. It is a mildly bullish indicator that the market closed over the pivot swing number. The next upside target is 1152.8. The next area of resistance is around 1144.5 and 1152.8, while 1st support hits today at 1120.5 and below there at 1104.8.

COMEX GOLD (DEC) 09/26/2006: The stochastics indicators are rising from oversold levels, which is bullish and should support higher prices. The market's close above the 9-day moving average suggests the short-term trend remains positive. The daily closing price reversal up on the daily chart is somewhat positive. The close over the pivot swing is a somewhat positive setup. The next upside objective is 603.5. The next area of resistance is around 600.6 and 603.5, while 1st support hits today at 591.2 and below there at 584.6.