GOLD:
GOLD MARKET FUNDAMENTALS: While the Tokyo gold market opened a bit higher overnight and the market appears to be poised to maintain a positive tilt, the market is somewhat concerned that a return to the negotiating table by North Korea might serve to rob the market of the limited flight to quality interest that might have been in place yesterday. In fact, a Harmony Mines executive overnight has predicted a gradual rise in gold prices because of restricted supply and because of a downside trend in the Dollar. Apparently the prediction of higher gold prices was made at a Gold & Precious Metals Investment conference. While a large portion of the trade accepts the idea that gold production is failing to keep pace with demand, the concept of a lower Dollar is difficult to buy into, with the Dollar recently reaching the highest level since July 19th. In other slightly supportive news for gold overnight, a London money manager has also predicted higher gold prices ahead but that prediction was also based on the idea of a weak Dollar and ongoing growth in China and India. In short, the gold market seems to have a positive dialogue flow, minimal support from the energy complex but perhaps less overall support from the North Korean situation. The lower gold production predictions from the International Gold Conference were given some credibility overnight, with news that South African 2005 gold production declined to 295 tons from 430 tons in the prior year. The December gold contract appears to have managed a minor new high for the move overnight and the market has managed to hold above the critical $575 level in the process. While the market still seems to lack a definitive upward force in prices, the bear camp certainly lacks the dominating control that was present in the first few trading sessions of October. Apparently the gold market was lifted in Asia overnight off the idea that oil prices were now set to firm as a result of winter fuel demand and that might hint at a firming of support in the energy complex, which in turn might help to firm support in gold. In the near term, December gold might be able to chop in a range bound by $575 to $588.5, but we still have to warn of concentrated selling potentials in the event that oil prices return to their lows.

SILVER:
SILVER MARKET FUNDAMENTALS: While the December silver contract has managed to hold a large portion of the gap up trade from Monday, the early copper gains this morning aren't nearly as supportive as was seen in the prior session. Certainly the gold market is expected to dominate the focus of silver but with platinum and copper prices both showing signs of strength overnight, it is possible that silver will attempt to migrate its focus away from gold/oil, to more of a physical or macro economic tilt. However, in order for silver to throw off the threat of concentrated selling, might require a moderate improvement in the forward look on the economy, as the internal supply and demand condition in silver is lacking fresh information. In short, to forge more near term gains, the silver market might have to see some fresh news of demand from India or the market will have to hope for more distinct and favorable leadership from the gold market. Near term critical support in December silver is seen at $11.32 and close-in resistance is seen at $11.62. In order to turn the long term trend back up in December silver, might require a move above the May through present down trend channel resistance line up at $12.87 but that down trend line is declining by roughly 2 cents per session. While we think the market is firming its support around the $11.00 level, we still can't rule out a near term trading range of $10.86 to $11.70.

METALS TECHNICAL OUTLOOK 10/10/2006

COMEX SILVER (DEC) 10/10/2006: A bullish signal was given with an upside crossover of the daily stochastics. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The intermediate trend could be turning up with the close back above the 18-day moving average. The gap upmove on the day session chart is a bullish indicator for trend. With the close over the 1st swing resistance number, the market is in a moderately positive position. The near-term upside objective is at 1167.3. The next area of resistance is around 1154.5 and 1167.3, while 1st support hits today at 1129.5 and below there at 1117.3.

COMEX GOLD (DEC) 10/10/2006: A negative indicator was given with the downside crossover of the 9 and 18 bar moving average. Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The close below the 9-day moving average is a negative short-term indicator for trend. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next downside objective is now at 573.3. The next area of resistance is around 586.7 and 589.0, while 1st support hits today at 578.9 and below there at 573.3.