Compiled 05/16/08 6:00 AM (CT)

Statistics: London Gold Fix $885.00 +$18.75 LME Copper stocks 121,225 tons +375 tons

GOLD MARKET FUNDAMENTALS: (6:00 AM CST) Apparently the gold market continues to discount classic fundamental supply and demand news, as the trade overnight was presented with evidence that Indian gold sales through one of the more critical annual demand periods actually declined versus year ago levels and yet that hasn't prevented gold prices from forging more gains. With the Press and trade pointing out the prospect that ultra high gold prices might have discouraged buying by Indians through the recent key demand period and the World Gold Council pegging the annual decline in gold sales to be 11% in the key Indian demand period there could have been a fundamental let down in gold prices this morning. However, with gold prices adding to the gains made in the prior session, in the face of the sagging regional demand news, it is clear that currency related influences or perhaps global investing interest is more than offsetting the Indian demand news. In another potentially supportive development overnight, a brokerage firm has suggested that hedging continued to decline in the first quarter and that in turn can prompt some traders to increase their implied demand figures in supply and demand calculations. With June gold prices to the May lows down by as much as $192 an ounce, one might expect even more hedge lifting in the second quarter, which in turn could add even further to the implied demand figures. With the Dollar seemingly caught in a 72.90 to 74.06 range recently, it is possible that the currency market action today will offer up somewhat less than expected direction to gold prices.

OUTSIDE MARKET DEVELOPMENTS: (6:00 AM CST) Apparently minimal weakness in the US Dollar in the face of ongoing slowing evidence is a favorable environment for the precious metals markets. One almost gets the sense that favorable global equity market action is serving to gloss over the lingering evidence of slowing in a number of critical economic zones and that in turn is allowing minor weakness in the Dollar to dominate the trade in metals. Surprisingly the metals markets managed to discount what appeared to be a rather significant washout attempt in the energy complex in the prior trading session, but with crude oil prices in the early going today sitting nearly $5.00 a barrel above the prior session's lows, it is clear that the energy bulls aren't easily discouraged. With the US economic report slate today somewhat active and largely expected to present more slowing evidence, it would seem like the US trade is expecting weak Dollar support again today. In fact, some traders seem to be hopeful of a perfect storm day today, with the US Dollar weaker, equities higher and oil prices firm.

Technical Analysis:
Note: Compiled during previous session 05/15/2008 at 3:21 PM CT CBOT GOLD (JUN) 05/16/2008: Positive momentum studies in the neutral zone will tend to reinforce higher price action. The cross over and close above the 18-day moving average is an indication the intermediate-term trend has turned 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.

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