By Nell Sloane, David Hightower

Gold and silver prices seemed to have been positively biased into the early US trade today despite a slightly higher US Dollar and a lack of definitive direction in a host of physical commodity prices. Apparently a favorable German business survey result and a slight recovery in equity prices into the early US Tuesday trade has given the precious metals bulls a slight edge. Apparently seeing gold prices hold within relative proximity to the recent high has kept investment interest strong, despite the lack of downside follow through in the US Dollar this week. However, the precious metals markets will see a rather active flow of scheduled US economic data this morning, with a US GDP revision, Consumer Confidence, a private house price survey and a Richmond Fed survey. However, after some steep losses in the Asian equity markets last night, both the US and European stock markets seem to have gathered some positive footing and that in turn seems to be countervailing the potentially negative impact from a slightly higher US Dollar. The markets will also see a 5 Year US Note auction around mid session today as well as the release of the latest US Federal Reserve Open Market committee meeting minutes.

GOLD MARKET FUNDAMENTALS: The gold market comes into the early US Tuesday trade with what seems to be a slightly positive early bias. In fact, while US equity prices were somewhat positive into the early US action and the trade saw a better than expected German Business confidence reading overnight, the Asian equity markets initially showed rather sharp ongoing concern toward the slow pace of the global recovery. However, gold prices in the early action today have remained within close proximity to their recent highs and have managed that strength despite a Wall Street Journal article on gold storage problems in Manhattan. Apparently the trade sees the filling up of gold storage, as a confirmation of a strong ongoing pattern of investment demand for gold, instead of seeing the news as a sign that investment interest for gold is reaching a saturation point. Some gold traders think that the gold market is set to get an additional lift later today in the wake of the FOMC meeting minutes release, as portions of the trade think the US Fed reconfirm the easing mode. With the markets initially seeing fresh economic slowing concerns in the Asian equity markets overnight, and also seeing the Russians cut interest rates again overnight, there would seem to be plenty of reasons for the metals trade to expect ongoing support from global monetary policy news. It is possible that the gold market could be slightly undermined in the wake of the scheduled US data flows this morning, especially if that news serves to provide a lift the US Dollar. No sign of a key reversal in gold, unless the US numbers are so soft that the Dollar sees a concentrated wave of flight to quality buying interest. While we doubt that the Wall Street Journal article on gold storage being filled up in Manhattan actually signals a major top, that type of news does increase the odds that the gold market will get seriously ahead of itself in the coming trading sessions. Near term targeting in February gold is now seen at $1,184.

SILVER MARKET FUNDAMENTALS: The silver market to this morning's early low has seen a rather wide trading range of almost 50 cents an ounce and that in turn would seem to highlight the prospect of ongoing price volatility. While some might suggest that silver will garner some support from news of a slight decline in monthly US physical silver production, the silver trade instead appears to be heavily vested in big picture views on the level of overall investment demand. Some silver traders will suggest that press coverage of an intense battle for gold storage space in Manhattan is a supportive development for silver, but other silver traders are worried that the battle for gold storage space could be suggesting that bullish sentiment for precious metals has reached extreme levels. However, it also seems as if the silver market is being graced with a series of bullish news stories touting silver as a cheaper alternative to gold. In the end, the silver market still appears to be poised to follow the lead of the gold market closely and perhaps to a lesser degree the silver market looks to be set to follow the direction of US equity market. In the end, some silver traders think that the US economic report slate today will be partially undermining for silver prices and other physical commodity markets, but in some cases there is already an expectation for slack US numbers in place. After some initial pressure in the wake of the US numbers, we suspect that March silver will find some measure of support off the $18.57 level. Expect volatility to increase dramatically over the coming two trading sessions, especially if the $18.00 level is violated in the March silver contract.

METALS TECHNICAL OUTLOOK:

Note: Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may appear elsewhere in this report.

COMEX GOLD (DEC) 11/24/2009: A new contract high was made on the rally. 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. The gap upmove on the day session chart is a bullish indicator for trend. 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 1186.3. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 1176.3 and 1186.3, while 1st support hits today at 1153.9 and below there at 1141.6.

COMEX SILVER (DEC) 11/24/2009: 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. The close over the pivot swing is a somewhat positive setup. The next upside objective is 1906.0. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 1877.5 and 1906.0, while 1st support hits today at 1836.5 and below there at 1824.0.