Compiled 11/19/08 6:00 AM (CT)

Statistics: London Gold Fix $737.75 +$1.25 LME Copper stocks 280,250 tons +1,475 tons

GOLD MARKET FUNDAMENTALS: (6:00 AM CST) The gold bulls must be ecstatic with the hope that the Chinese might be poised to significantly increase their gold reserve holdings. In fact, the talk out of Hong Kong overnight was that the Chinese central bank might be planning to increase the gold held in reserve by as much as 4,000 tons and that is certainly a number that is capable of impacting the price of gold over time. However, the Chinese gold reserve news is somewhat tempered by the realization that Russia might be liquidating some of their gold and currency reserves, in an effort to provide liquidity to the troubled Russian financial markets. In fact, after an announced change in the way the Russian Gold and currency reserve week figure is calculated, the Russian gold and currency reserves overnight were noted to have declined by $57.5 billion over the last two months. In another potentially supportive development, the gold market did see fresh press reports overnight of a sharp decline in Zimbabwe gold production in the latest monthly figures and therefore the overnight news would generally seem to favor the bull camp from the supply side angle. However, the gold market looks to maintain some form of correlation with the equity markets and it is possible that some players will simply be discouraged in the wake of the scheduled US data flow this morning, but the impact of the US data flow might be overshadowed by the action in the US Dollar.

OUTSIDE MARKET DEVELOPMENTS: (6:00 AM CST) With the Dollar under pressure early this morning, a number of physical commodity markets seem to have temporarily thrown off the fear of too much slowing and the fear of ongoing deflationary selling. However, the metals markets will have to contend with another potentially soft US inflation reading this morning and the markets might also have to contend with a weak US Housing Starts and Permits report and that could keep the combination of slowing and deflation in play. While equity prices are showing some initial weakness this morning and that type of action has recently been seen as a negative for gold and silver prices, the equity markets capacity to recover off the lows in the prior trading session seems to have tempered bearishness toward physical commodities. In another potentially supportive outside market development, the Libor rate continues to fall and US Treasuries prices this week have managed distinct upside action and that would seem to suggest that some market conditions are trending back toward normal. If precious metals prices were being driven recently by flight to quality issues, then the action in Libor and Treasury markets could have been seen as bearish, but since the precious metals have recently been treated like physical commodities facing an unrelenting recession, it is possible that the favorable interest rate action is capable of supporting gold and silver prices. However, it would not appear as if the evidence of slowing from the US will abate today with the active report schedule of the coming two trading sessions expected by economists to reveal more slowing.