Compiled 05/15/08 6:00 AM (CT)

Statistics: London Gold Fix $866.25 +$1.25 LME Copper stocks 120,850 tons -575 tons

GOLD MARKET FUNDAMENTALS: (6:00 AM CST) With some signs of bargain hunting buying in the Indian gold market overnight, an initially lower US Dollar and expectations for slack US economic readings it is possible that the slightly bullish early tilt will stay in place into the US number flow. Once again Russian gold and currency reserves posted another impressive weekly rise to $536.8 billion, from the prior week's reading of only $533.9 billion. Evidence of sharp gains in the dry bulk freight rate market this week would seem to suggest that overall global demand and perhaps global economic activity remains on track and that could ultimately help the gold market get back onto a classic inflationary focus, instead of focusing on the direction of the US Dollar. In the near term, the gold market doesn't seem to have much in the way of fresh supply side themes to distract the trade from the currency markets and therefore the presence of US numbers this morning looks to dominate. While the market seems to have downgraded the impact of oil prices on gold prices this week, a decline below this week's consolidation low of $123.56 in July crude oil could make the action in the energy complex somewhat more important to the gold trade.

OUTSIDE MARKET DEVELOPMENTS: (6:00 AM CST) With the Euro zone GDP reading overnight coming in at +0.7% that barely surpasses the 1st quarter reading seen from the US and that in turn seemed to give the Euro a slight lift against the Dollar this morning. In fact, in looking at the Euro zone data overnight it was clear that the German economy really contributed to the growth in the Euro zone and that hints at resiliency in certain sectors of the Euro zone economy. With the US scheduled report flow today extremely active and many of the expectations calling for soft readings, it is possible that the recent uptrend bias in the Dollar could be called into question. With the Dollar initially lower and the Euro providing some basis for early strength, the gold and silver markets might not be presented with as much of a threat from the currency front today. However, since expectations call for weak US numbers, traders should not underestimate the impact of better than expected US readings. On the other hand, energy prices have generally forged a consolidation pattern this week (despite the fact that they also made more new highs) and therefore many traders are watching for some sort of failure in that market and that could provide a fresh outside market negative for precious metals prices. In the end, the outside market influences for the metals markets are mostly positive in the early going with the Dollar weaker and Oil prices firmer.

Technical Analysis:
Note: Compiled during previous session 05/14/2008 at 3:21 PM CT CBOT GOLD (JUN) 05/15/2008: Stochastics are at mid-range but trending higher, which should reinforce a move higher if resistance levels are taken out. The close below the 9-day moving average is a negative short-term indicator for trend. The market tilt is slightly negative with the close under the pivot.

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