METALS: OVERNIGHT CHANGE to 4:00 AM: GOLD +1.20, SILVER +8.00

London Gold Fix $648.25 +12.75

LME Copper stocks 101,325 ml tns, +750 tons

COMEX Gold stocks 8.087 ml oz., unchanged

COMEX Silver stocks 98.4 ml oz
Dn 539,199 oz

OVERNIGHT ACTION: A slightly bullish tilt overnight despite a slight Dollar rise.

OUTSIDE MARKET DEVELOPMENTS: With the Precious metals markets showing a mostly positive track in the early action today, it would not seem like marginally higher US Dollar action is serving to undermine sentiment. However, with oil and equity prices both higher overnight, one might assume a mostly bullish outside market environment for the metals markets into the opening this morning. In fact, with the US economic report slate mostly empty today, the metals markets will probably be able to pay more attention to potentially supportive inter-market relationships.

GOLD:
GOLD MARKET FUNDAMENTALS: With the Press picking up on an intensification of the ground fighting in Lebanon, equity prices initially higher and oil positively biased, it would seem like the investing and flight to quality buying interest will be on the rise today. However, the market will have to discount a sharp 1st half rise in gold production at Highland Mines, which managed to produce 91,205 ounces of gold compared to only 63,749 ounces of gold in the first half of 2005. On the other hand, the market hasn't exactly been reacting to output figures and with the mostly charged political condition dominating market talk, we suspect that an upward bias will be maintained. In fact, we suspect that investment interest in the market will also be raised by the technicals, as December gold has ventured up through several layers of technical resistance in the last 24 hours. About the only element not supporting the bull case in the early going today is the slightly higher US Dollar, but given the fact that the Dollar at the overnight low was 70 points below the prior day's highs and 230 points below the July highs, it would not seem like the Dollar is going to limit the bull camp. The recent upward bias is certainly being extended into the opening today. In fact with the Lebanon fighting expanding, Iran flatly rejecting the UN, equity and energy prices showing early strength and all the metals showing positive action early, we have to think that the gold market will continue to grind its way back toward the next resistance point up around $675. Near term close-in support is seen at $656, with key trend line support of $646 potentially set to be the extent of any nominal near term correction.

SILVER:
SILVER MARKET FUNDAMENTALS: With a new high for the move overnight it would seem like silver is already benefiting from the upward extension in the gold market. With the combination of higher equity and oil prices this morning, the silver market looks to be able to attract ongoing buying interest. In fact, the trade is talking up a return to the $12.00 level and therefore there might be little resistance until that level is tested. There still hasn't been much of a focus on the persistent decline in exchange stocks, but as long as the trend is for a decline in physical silver supply, the bulls will probably be emboldened. As we noted yesterday, the silver market was probably given an added lift by silver mining executive dialogue that labeled current silver industrial demand to be "robust". In short, the silver market is seeing favorable physical fundamentals and is also getting a steady flow of geopolitical flight to quality buying interest. In the current environment, the silver market is apparently able to downplay the potential slowing of the US economy. With the market apparently intent on tracking to $12.00 again, it is possible that the September contract manages to consistently hold above $11.77. In fact, given the upward extension this week, we would not expect the market to run into much selling pressure until the $12.25 level, which would be the top of the up trend channel that started after the June bottom.

METALS TECHNICAL OUTLOOK 8/2/2006

COMEX SILVER (SEP) 08/02/2006: The cross over and close above the 60-day moving average indicates the longer-term trend has turned up. Momentum studies are trending higher but have entered overbought levels. The market's close above the 9-day moving average suggests the short-term trend remains positive. Since the close was above the 2nd swing resistance number, the market's posture is bullish and could see more upside follow-through early in the session. The near-term upside target is at 1212.0. The next area of resistance is around 1197.0 and 1212.0, while 1st support hits today at 1151.1 and below there at 1120.1.

COMEX GOLD (AUG) 08/02/2006: The market now above the 60-day moving average suggests the longer-term trend has turned up. The daily stochastics have crossed over up which is a bullish indication. Momentum studies are trending higher from mid-range, which should support a move higher if resistance levels are penetrated. The intermediate trend could be turning up with the close back above the 18-day moving average. The market's close above the 2nd swing resistance number is a bullish indication. The near-term upside target is at 659.1. The next area of resistance is around 654.8 and 659.1, while 1st support hits today at 637.8 and below there at 625.2.

***

Nell Sloane
Email: nell@nsfutures.com
1 800 238-2610
http://www.nsfutures.com

Email this page to a friend

To those of you who have emailed or commented on the daily commentary regarding price manipulation, our daily comments are strictly to provide our customers and subscribers with news, which may influence the markets marginally on a day-to-day basis. This is not the forum to address price manipulation

There are many ways in which you can participate based on your bullish or bearish perspectives in the metals complex. Investment in mining shares, as well as purchasing bullion, are just a few. Another investment of choice is through futures and/or options on futures contracts. If you have traded, then you will be able to appreciate the brokerage service that Nell Sloane and Group can offer. If you have not, and wish to learn more about it, please feel free to contact her staff so that they can forward some educational literature for your review. Contact Nell Sloane or a member of her team at 1 800 238-2610.

Past results are not necessarily indicative of future results. The risk of trading futures and options is substantial; therefore, only genuine risk funds should be used.

This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. This report should not be construed as a request to engage in any transaction involving the purchase or sale of a futures contract and/or commodity option thereon. The risk of loss in trading futures contracts or commodity options can be substantial, and investors should carefully consider the inherent risks of such an investment in light of their financial condition. Any reproduction or retransmission of this report without the express written consent of Hartfield Management, Inc. is strictly prohibited.