GOLD:
GOLD MARKET FUNDAMENTALS: In looking at the interday action in gold yesterday, it was clear that the market was correlating with the oil market, but this morning the gold market is throwing off a bit of negative correlation, by forging gains early in the face of minor oil price weakness. In a big picture sense, the outlook toward the US and global economy has seemingly leveled out and with any further strength in oil prices, it wouldn't be unfair to suggest that even inflation expectations are getting a revival. In other news, Newmont Mining has suggested that they will lower their 2006 gold output projection by 300,000 ounces due to developments in Uzbekistan. With the US GDP report due out this morning the trade will looking to a +2.9% reading as a bull/bear line but with world equity markets generally higher and the new home sales report yesterday helping repair the concern toward the US housing sector, the gold market is seeing a slightly better macro economic condition than was present for a large portion of early September. In conclusion, it seems that buyers are being drawn back toward gold, but the price action continues to be somewhat suspect with back and forth action on the recent rally highlighting a questionable uptrend pattern. With the market getting some outside market assistance, prices regaining several key areas on the charts and at least some uncertainty from the oil market, we suspect that the bull camp will retain an edge. In fact, with a mostly positive equity market in the back ground, a slight revival in inflationary expectations and perhaps even geopolitical uncertainty returning, we suspect that December gold will manage to respect support of $607.8. In our opinion, the trend in gold remains up as long as the December contract manages to hold above critical support of $606.4.

SILVER:
SILVER MARKET FUNDAMENTALS: The silver market continues to benefit from macro economic conditions, recent recovery action in energies and from ideas that international demand for silver is improving. With the overnight gains, the December silver contract is closing in on the 100 day moving average of $11.88 and that could provide an additional near term psychological boost to the bull camp. However, it would seem that positive action in copper and the equity market are very important to the bull camp and it is also possible that silver will need to see an "as expected" or "slightly better than expected", US GDP reading this morning just to keep the mostly bullish tilt in place for another session. While oil prices are impacting gold and are also reportedly impacting silver, many traders have trouble with that correlation over the long run. In fact, a certain portion of traders continue to think that silver will continue to favor physical commodity fundamentals and will be heavily reliant on the prospect of rising Indian and Chinese demand and in turn that silver will not be as dependant on the direction of the Dollar and the usual flight to quality issues that dominate the gold market. Critical support in December silver today is seen at $11.72 and there might be little resistance until the $12.00 level. With copper higher this morning and the equity markets still generally positive, we suspect that silver will attempt to push back toward the bottom of the August consolidation zone, which sits just on top of the $12.00 level. In short, we think that silver is more of a commodity than a financial market and therefore good growth and rising physical demand are the keys to more price gains.

METALS TECHNICAL OUTLOOK 9/28/2006

COMEX SILVER (DEC) 09/28/2006: Momentum studies are trending higher from mid-range, which should support a move higher if resistance levels are penetrated. The cross over and close above the 18-day moving average indicates the intermediate-term trend has turned up. Market positioning is positive with the close over the 1st swing resistance. The next upside objective is 1197.0. The next area of resistance is around 1184.0 and 1197.0, while 1st support hits today at 1156.1 and below there at 1141.1.

COMEX GOLD (DEC) 09/28/2006: Momentum studies are rising from mid-range, which could accelerate a move higher if resistance levels are penetrated. 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 609.9. The next area of resistance is around 607.2 and 609.9, while 1st support hits today at 599.4 and below there at 594.3.