GOLD:
GOLD MARKET FUNDAMENTALS: The gold market seems to be lacking a definitive theme and therefore the tight sideways trade of the last two sessions isn't that surprising. However, the Dollar generally looks to remain under pressure in the wake of US Fed predictions of ongoing Central Bank diversification away from the Dollar. In other news, the gold market was confronted with another "de-hedging" projection, that apparently puts the total annual hedge reduction into the end of the 3rd quarter at roughly 12 million ounces and that is mostly level to recent expectations. However, the report also noted that the current global hedge book was approximately 48.2 million ounces or somewhat less than half the record hedge book that was in place in the 1st quarter of 2003. In other words, producers are still reducing hedge coverage, but at perhaps a slightly less aggressive pace and that might be considered slightly bearish to prices by some players. With the passing of the election it is possible that gold will return its focus to the currency markets or perhaps to the oil market, but in order to see prices react aggressively today, might require a more significant outside market reaction than is currently being signaled by the early trade. With the European trade expecting to see declines in the Dollar ahead, we suspect that gold will generally be able to respect chart support levels in the coming session. However, we don't get the sense that the bull camp is really capable of driving prices sharply higher in the near term. Critical support in the December gold comes in at $624.2 and then again at $623.6, but most traders are probably seeing the $620 level as the real pivot point today.

SILVER:
SILVER MARKET FUNDAMENTALS: With the passing of the US election, the metals markets will need to garner a new focus. While the trade is still generally expecting Dollar weakness to provide some support to the gold market and that in turn might be expected to underpin silver prices, silver doesn't seem to be overly interested in the Dollar action. While there was an upbeat forecast for base metals markets overnight, the silver market might not fully benefit from that forecast this morning, because of some early weakness in copper and platinum prices. Furthermore, recent action in silver continues to suggest that traders are more interested in the direction of gold than they are on the ebb and flow of physical metals demand expectations. In fact, given relative price action in gold and silver over the last two sessions, it almost seems like the silver market is actually leading the gold market and that could mean that overt weakness in oil prices this morning in the wake of the inventory report or a temporary bounce in the Dollar won't necessarily apply direct pressure to silver prices. In the near term, the odds of more sideways consolidation are high but a slightly bullish tilt still seems to be present in both traders dialogue and the Press coverage this morning. As long as the pattern of higher lows is present on the charts, we suspect that the bull camp will retain a minor edge. Close-in support on the charts today is seen at $12.62, with a fresh upside breakout potentially signaled by a simple rise above $12.77. In the end, we suspect that tighter ranges will be seen ahead, as the market is searching for a new dominant theme.

METALS TECHNICAL OUTLOOK 11/8/2006

COMEX SILVER (DEC) 11/08/2006: Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. 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 next upside objective is 1283.5. The next area of resistance is around 1275.0 and 1283.5, while 1st support hits today at 1260.1 and below there at 1253.5.

COMEX GOLD (DEC) 11/08/2006: Momentum studies are trending higher but have entered overbought levels. The close above the 9-day moving average is a positive short-term indicator for trend. The market has a slightly positive tilt with the close over the swing pivot. The near-term upside objective is at 633.2. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 630.2 and 633.2, while 1st support hits today at 625.2 and below there at 623.2.