By Nell Sloane

It would seem as if a number of outside market forces are providing the bull camp in gold and silver with an early lift today. Clearly seeing the Greenback fall back to the February lows and seeing a host of non Dollar currencies rising sharply, have given the bull camp the currency edge in the early Friday morning trade. With a number of equity market measures also managing to make new highs for the year and in some cases, seeing the highest trade since late summer of 2008, there would appear to be a wave of positive economic sentiment in place. Perhaps the trade was emboldened by favorable Euro zone Industrial Production readings, or perhaps the up beat Chinese economic data from early in the week was finally given some credence. On the other hand, some players are suggesting that the possible appointment of Janet Yellen, as Vice Chair of the US Federal Reserve is supportive because she is supposed to be a noted policy dove. In looking forward, the trade will be presented with a US retail sales reading this morning which is mostly expected to show a minor downtick, but that impact might be countervailed by a possible minor up tick in sentiment figures later in the US trading session.

GOLD MARKET FUNDAMENTALS:

With global equities showing strong early gains, the Dollar under noted pressure and global economic sentiment mostly positive, it would seem like gold and other physical commodity markets are facing a classically supportive fundamental environment early today. The bull camp might try to play up supportive news of declining South African gold production, as the trade saw yet another story from that front overnight. Earlier in the week South Africa posted a sharp year over year monthly gold production decline and in the early trade today, the gold market was presented with a private forecast that pegged 2009 annual South African annual gold production to have declined. Even the Indian gold market was higher overnight and that should have the bull camp confident into the US scheduled data flow. However, the bear camp might hold out hope, that weaker US retail sales numbers will provide the Dollar with a lift and that some of the positive sentiment in place early today, will be moderated. On the other hand, the  ull camp does seem to have a broad measure of outside market forces working in their favor in the early Friday trade. An issue that the bears might try to play up later in the trading session today, is the idea that next week's FOMC meeting might temper the current belief that US rates will be left low for the next 6 months. Also tempering bullishness toward gold this morning, is overnight press coverage that the Chinese once again talked against expanding their official gold holdings. At least into the US opening today, outside market action and classic supply side issues seem to have given the bulls the upper hand. The bulls have a long list of issues in their court today. In addition to very favorable currency market action and soaring equity price action, the bull camp was also blessed with news of declining production from the world's 4th largest gold producer. With the added impact of a recently oversold short term technical condition, the bull camp looks to control the trade today. Therefore, a near term rise back above $1,126 looks to be possible today, with a rise up to $1,138 not out of the cards over the coming two trading sessions.

SILVER MARKET FUNDAMENTALS:

The silver market is showing positive early action on the charts and it would appear that a number of outside market forces are favoring the bull camp in the early Friday morning silver trade. Like gold, the silver market might have been partially oversold around the prior session's lows and that in turn could be providing the market with a measure of technically related short covering buying. However, silver might also be deriving some buying interest from big picture macro economic developments, as classic supply side news in silver overnight wasn't particularly supportive. In fact, a number of Press outlets overnight carried news of an increase in Russian silver production for 2009, but the bull camp in silver will probably suggest that was largely an anticipated development. Furthermore, some traders think that increases in silver output are going to be absorbed by rising investment and physical demand. The silver market has also managed to discount a modest rise in daily silver exchange warehouse stocks overnight perhaps because of noted strength in a number of physical commodity markets this morning. The bulls clearly have the initial edge today and that could mean a quick trip back above the $17.50 level. In fact, we see little in the way of resistance in the May silver contract until the $17.53 level. Down trend channel resistance in May silver isn't seen until $18.13 on Monday, with that resistance falling to $18.11 next Tuesday.

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 (APR) 03/12/2010: The major trend could be turning up with the close back above the 40-day moving average. Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The market's close below the 9-day moving average is an indication the short-term trend remains negative. The daily closing price reversal up is a positive indicator that could support higher prices. It is a slightly negative indicator that the close was under the swing pivot. The next downside objective is now at 1096.6. The next area of resistance is around 1115.0 and 1118.9, while 1st support hits today at 1103.8 and below there at 1096.6.

COMEX SILVER (MAY) 03/12/2010: Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The close above the 9-day moving average is a positive short-term indicator for trend. The upside daily closing price reversal gives the market a bullish tilt. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next downside objective is now at 1674.4. The next area of resistance is around 1734.2 and 1743.3, while 1st support hits today at 1699.8 and below there at 1674.4.