GOLD:
GOLD MARKET FUNDAMENTALS: Apparently the gold market wasn't seriously undermined by the outcome of the Fed meeting yesterday. However, those traders looking for the slightest threat of higher rates ahead probably found something in the Fed dialogue yesterday for them to embrace. On the other hand, seeing equity prices weather the Fed storm and also seeing the crude oil market come bounding back yesterday is certainly a major improvement for the bull camp in gold. In fact, seeing oil prices firm could take some of the teeth out of the bear case and in turn potentially reduce the risk to fresh longs. With recent weak US numbers and the reaction in the market's yesterday to the Fed statement, the general consensus is that the Fed is set to remain on hold, perhaps through the end of the year. In fact, some Press reports overnight have suggested that the gold market might become a little more even keeled in the coming sessions because of the Fed stance, while others continue to fret over the potential for more evidence of a weakening US economy in today's numbers. Chinese spot gold ended higher overnight and with the Dollar remaining under pressure, the initial setup this morning is apparently supporting prices. Some positive overnight Press coverage of a continuation of the commodities boom and talk that gold is potentially going to be able to revive its inflation hedge status, round out the bullish dialogue into the opening this morning. However, the bull camp will have to clear the US numbers this morning, which have recently favored the bear camp. While the market seems to have rejected the $575 area on the charts, there would appear to be initial resistance today at $596.5 and then again up at $600. In our opinion, the big threat of concentrated selling has mitigated, but also like the oil market, the gold trade will probably have to get more fundamental help in order to turn the tide in prices to the upside. We can't rule out a near term December range of $582 to $604.

SILVER:
SILVER MARKET FUNDAMENTALS: With somewhat positive early action from the gold market and what some are calling a temporary all clear on the interest rate front, it would seem like control of the silver market has shifted back toward the bull camp. In fact, Tokyo silver was higher overnight and copper was also showing some minor, but positive early gains. Therefore, it is possible that the bear camp won't have as much of a free hand today in pressing silver prices in the wake of potentially negative fundamental news stories. However, to extend the upside action in silver might require a better macro economic outlook, a sharp additional decline in the Dollar or perhaps most importantly, further gains in energy prices. In fact, the silver market continues to track closer to gold, than to copper or the equity market and that suggests silver is currently a secondary market to gold. However, the Press overnight pointed to renewed speculative interest in silver and that is to be expected in the wake of the energy bounce yesterday and the potential sustained on-hold status at the Fed. In fact, if the US numbers avoid significant softness, the short covering incentive might be able to carry the interest of the silver market for the session today. While the bull camp hopes that the $12.00 level manages to be solid support, we suspect that the December contract will see some fluctuations below that level. However, in the near term the path of least resistance is pointing upward and the market will probably attempt to make some minor hard fought gains. Right now, the silver market is set to follow directly in the footsteps of the gold market, which in turn is set to follow the movement of the oil market closely.

METALS TECHNICAL OUTLOOK 10/26/2006

COMEX SILVER (DEC) 10/26/2006: Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. A positive signal for trend short-term was given on a close over the 9-bar moving average. It is a mildly bullish indicator that the market closed over the pivot swing number. The next downside target is 1163.7. The next area of resistance is around 1201.3 and 1212.6, while 1st support hits today at 1176.8 and below there at 1163.7.

COMEX GOLD (DEC) 10/26/2006: Stochastics are at mid-range but trending higher, which should reinforce a move higher if resistance levels are taken out. The close below the 9-day moving average is a negative short-term indicator for trend. It is a mildly bullish indicator that the market closed over the pivot swing number. The next upside target is 601.4. The next area of resistance is around 596.7 and 601.4, while 1st support hits today at 584.9 and below there at 577.8.