Compiled 10/14/08 6:00 AM (CT)

Statistics: London Gold Fix $849.50 -$15.50 LME Copper stocks 211,800 tons +2,475 tons

GOLD MARKET FUNDAMENTALS: (6:00 AM CST) Clearly a number of gold traders are uneasy about the prospect of another big up day in the US equity markets. However, some traders are suggesting that an upgrade in economic expectations might be countervailing the severe deflationary fears that seemed to knock the gold market off balance at the end of last week. While some international Press outlets are already beginning to talk up an upcoming seasonal demand window in India, the physical demand impact on gold prices probably isn't being given as much credence as the ebb and flow of influence from the financial sector travails. Other traders are suggesting that the higher gold market action early this morning is the direct result of a weaker US Dollar. Some traders might even suggest that the gains in the gold market this morning are coming compliments of the hotter than expected UK inflation readings and the sharp ongoing recovery bounce in oil and a host of other physical commodity markets. On the other hand, it was clear that a large portion of the September 11th through October 10th rally was indeed forged off extreme flight to quality buying of gold and therefore it isn't surprising to see the December gold contract falling back toward the classic 50% retracement point of $838 on the charts. The.618 retracement level off the September and October rally is pegged at the $814 level today, with the 21 day moving average in December gold sitting above the market today at the $870.7 level.

OUTSIDE MARKET DEVELOPMENTS: (6:00 AM CST) With the precious metals markets showing slightly positive early action today, it would seem like the flight to quality liquidation interest has leveled out somewhat and that prices are in some ways benefiting from improving macro economic expectations. It is possible that the fear of significant slowing and deflation prompted some of the overly aggressive long liquidation in gold over the last several trading sessions, but with the Dollar showing some signs of weakness this morning, that appears to be countervailing some of the safe haven selling incentive. In fact, with the biggest up day ever in the history of the US stock market on Monday and more gains being mounted in the early going today, that would seem to suggest that dire slowing fears were somewhat overblown. With the US economic report slate today remaining rather thin, that might allow the optimism toward the economy to sustain further and that in turn could leave the bull camp in gold and silver in a somewhat favorable position. Surprisingly the markets overnight seemed to discount a very weak set of economic readings from Germany!