GOLD:
GOLD MARKET FUNDAMENTALS: News from Highland gold that Barrick Gold might raise its stake in that company to 34% might be somewhat supportive to gold, as that news seems to suggest that some major gold players continue to think that assets within the sector are undervalued. In another supportive fundamental news story overnight, Newmont Mining indicated that they expected to see gold production fall by as much as 300,000 ounces due to a write down in its Uzbekistan operation. Within that Newmont Mining story were suggestions that the company would continue to battle in finding enough new reserves just to cover the rate of depletion at the company. GoldCorp also reported a decline in their second half 2006 gold production of roughly 75,000 ounces and therefore ideas that gold production will continue to contract through the end of 2007, are given more credence. However, countervailing the mostly bullish Barrick Gold and Newmont Mining news, were indications overnight that Randgold posted higher 3rd quarter gold production from favorable pricing and new production flow from a mine in Mali. While the gold market seems to be tracking its own fundamentals, we suspect that the direction of the Dollar remains a paramount factor to the daily trade. It is possible that the Dollar will take a long look at the Challenger Layoff report today because that report is due directly ahead of the sometimes ultra critical Monthly payroll report on Friday morning. With the December gold unable to rise above the prior days highs and the market a bit overbought technically, it is possible that the bull camp will have to get some help from outside markets or risk seeing a bit of a let down in prices. Certainly the market has been impressive with its ability to discount weakness in oil and yesterday the market even managed to forge gains without the assistance of a weak Dollar. However, in order to continue the rise and mount a move above $625, we think this market will need some help from the Dollar. In fact, given the pattern of weak US numbers recently and the fact that the German jobless rate declined moderately overnight, it would seem like the Dollar will remain in a downward bias. The market is overbought but decent support at $616.3 should hold up prices and the Dollar looks to keep the bulls in control.

SILVER:
SILVER MARKET FUNDAMENTALS: While the silver market managed an impressive new high for the move yesterday, this market might need some fresh fundamental fodder to definitely put prices above the next critical point on the charts of $12.50. Fortunately for the silver market bulls, the market seems to be immune to the overt weakness in copper, lead and zinc prices and also seems to be uninterested in the recent weakness in the US equity market. In other words, the silver market is not trading like a physical commodity or an industrial demand driven commodity, it seems to be trading right off the gold market and perhaps a flight to quality psychology. The trade talk points to an initial support level on the charts of $12.38 in the December contract and it might be logical to assume that resistance is simply the prior day's high of $12.58. In short, the silver seems to be tracking the gold market, which appears to be loosely following the direction of the Dollar. It would seem like an "investing" trend is lifting silver and that the typical outside market forces are of little importance. However, given the positive posture of the market, we suspect that silver is capable of spinning the data in the coming two sessions into a supportive tilt. In fact, if the numbers continue to be weak, the trade could see a weak Dollar lift gold and then silver prices. On the other hand, seeing the US payrolls come in good, in the wake of the favorable German employment readings overnight, might simply prompt the trade to suggest that the global slowing isn't as bad as was feared and that in turn could support prices. In our opinion, the trend in silver will remain up as long as the December contract holds above $12.33 today.

METALS TECHNICAL OUTLOOK 11/2/2006

COMEX SILVER (DEC) 11/02/2006: Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The market's close above the 9-day moving average suggests the short-term trend remains positive. Follow through buying looks likely if the market can hold yesterday's gap on the day session chart. With the close over the 1st swing resistance number, the market is in a moderately positive position. The next upside target is 1271.3. The next area of resistance is around 1259.5 and 1271.3, while 1st support hits today at 1235.5 and below there at 1223.3.

COMEX GOLD (DEC) 11/02/2006: The market now above the 60-day moving average suggests the longer-term trend has turned up. Rising stochastics at overbought levels warrant some caution for bulls. The market's short-term trend is positive on the close above the 9-day moving average. If yesterday's gap higher on the day session chart holds, additional buying could develop this session. The market has a bullish tilt coming into today's trade with the close above the 2nd swing resistance. The next upside objective is 626.0. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 623.6 and 626.0, while 1st support hits today at 615.0 and below there at 608.7.