GOLD:
GOLD MARKET FUNDAMENTALS: With the Asian and European Press fretting over the prospect of investor liquidation in the wake of recent price weakness, the onus might be on the bull camp to stand up the selling pattern for the coming 2 or 3 sessions. With the energy market clearly rejecting OPEC's capacity to support oil prices above the $60.00 level, the Dollar rebounding sharply and US equity prices looking to start the session out choppy, there would seem to be few supportive themes in the early going today. With some Asian markets closed for a Muslim holiday and markets in Thailand also closed, one might even suggest that the gold market is lacking some of the recent physical buying interest support that has periodically been present over the last two weeks from the Asian markets. In short, the US session recently has been the main undermining marketplace, and without the positive Asian dialogue circulating ahead of the US opening, it is possible that the bear camp will feel more confident in pressing prices. In the end, seeing oil prices at the lowest level since November 2005 would seem to push money away from metals. In fact, until the sharply lower oil prices serve to lift stock prices and in turn improve sentiment toward future growth, the gold market might simply be more concerned about deflation, than inflation. With the early bias in prices pointing downward, the Dollar rising and oil prices apparently flat on their back again this morning, it is highly likely that December gold prices are headed to the next lower support zone on the charts of $589.4. Given that the October 17th Commitment of Traders with Options report showed the Gold Non-Commercial position to be net long 58,294 contracts and the Non-reportable position was also net long 25,176 contracts, we would suggest that gold might actually be headed down to even lower support of $575 into and through the coming US FOMC meeting results.

SILVER:
SILVER MARKET FUNDAMENTALS: While the silver market could have been lifted overnight by a bullish silver price forecast from a Canadian Bank/Brokerage firm, the silver market can hardly stand up to the negative bias in gold and to the pattern of lower oil prices. The basis of the bullish silver price forecast was that the US Fed was poised to remain on hold (with respect to US interest rates) which in turn should lead to a weaker Dollar. The bullish forecast on silver also pointed to a return to contango pricing between contracts in certain silver markets and that means that some players have cause to remain upbeat toward prices. However, in the near term the macro economic and outside market influence seems to be patently bearish to start the new week and some traders appear to be fearful of a return to lower critical moving average support on the charts. About the only positive for silver early in the action today, is the fact that copper prices are attempting to maintain a positive price track and that could dampen some of the concern of slowing physical demand in silver. With close-in support seen early today at $11.64 and another critical moving average seen down at $11.58, we suspect that the path of least resistance in silver is set to point downward today. With the October 17th Commitment of Traders with Options report showing the Silver Non-Commercial position to be net long 19,283 contracts and the Non-reportable position also net long 19,602 contracts, there certainly appears to be the capacity for long liquidation. In fact, with the December silver contract not even back down to the level where the COT report was measured, it is possible that the net spec long in silver into the opening this morning, is actually above the level where the COT report was measured last week. Under slowing growth fears, fears of the Fed and sliding oil prices, it might not be difficult to see December silver prices this week dip down to $11.13.

METALS TECHNICAL OUTLOOK 10/23/2006

COMEX SILVER (DEC) 10/23/2006: Momentum studies are trending higher but have entered overbought levels. A positive signal for trend short-term was given on a close over the 9-bar moving average. It is a slightly negative indicator that the close was under the swing pivot. The near-term upside target is at 1225.3. The next area of resistance is around 1209.5 and 1225.3, while 1st support hits today at 1183.5 and below there at 1173.3.

COMEX GOLD (DEC) 10/23/2006: The market back below the 40-day moving average suggests the longer-term trend could be turning down. A positive indicator was given with the upside crossover of the 9 and 18 bar moving average. Rising stochastics at overbought levels warrant some caution for bulls. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market's close below the pivot swing number is a mildly negative setup. The next upside objective is 605.8. The next area of resistance is around 600.5 and 605.8, while 1st support hits today at 592.3 and below there at 589.3.