GOLD:
GOLD MARKET FUNDAMENTALS: With more than a few brokerages and industry analysts suggesting that mining stocks are a buy on the recent correction and the Dollar showing signs that pricing above the 86.00 level was unsustainable, it would seem that a measure of the negative sentiment in place at the beginning of the week toward gold has been reversed. However, even though prices are showing early strength, it is possible that a rate hike by the Swiss National Bank, recent rate hikes in South Africa and the expectation for higher US interest rates ahead will serve to keep optimism toward gold at a minimum. In the end, there seems to be enough value hunting buying interest to countervail the aggressive pattern of selling seen for the last month. However, value hunting buying might have to be joined relatively quickly by fresh long term buying to effectively quiet a fortified bear camp. Recent comments from the US Fed seemed to rekindle the inflation concern in the US economy and so far it is difficult to determine whether or not inflationary concerns are a net positive or a net negative to gold. In other words, seeing inflationary fears rise at the Fed, might result in more tightening beyond the June 28th meeting and that could rally the Dollar and in turn slow US growth. In short, the gold market seems to sit in a precarious situation, where better but not too much better growth is needed to allow for a bullish gold environment. With the rise above $575 overnight the spirit of the bull camp is revived somewhat and there would seem to be little resistance in the market until the $582.9 level. However, in order to concede to anything other than a simple technical bounce, the gold market might have to see the September Dollar fall back below 85.35 or there will have to be some solid progression of gains in the equity market. In fact, to have inflation or flight to quality support in gold, against the recent selling trend, might also require a series of gains in the stock market. A normal 50% retracement off the May and June slide would seem to allow for a bounce to $642.8 without even altering the down trend pattern and that is a testament to the magnitude of the recent slide in gold prices. In our opinion, to see gold shift back into a bull market distinction, might require getting out from under the weight of the US Fed.

SILVER:
SILVER MARKET FUNDAMENTALS: While the silver market balanced its supply condition somewhat overnight with another moderate decline in exchange stocks, the supply and demand setup isn't exactly conclusively in the bull camp. Certainly seeing firmer copper and platinum price action early today is helpful but the silver market just isn't generating a large volume of bullish headlines in the Press. The silver ETF shows net holdings of silver to have declined to 68.4 million ounces and the net asset value of the fund has dipped down to $665 million. However, with equity prices mounting an impressive 24 hour recovery, it seems that the overall macro economic impact on silver has improved. It would certainly help the investment standing of silver to be supported in the bottoming attempt by favorable analyst dialogue, but so far the silver coverage has been very limited. Therefore, the threat of renewed selling seems to live on despite the initial strength into the US opening this morning. It should be noted that silver did manage to recover back above the 200 day moving average in each of the last three sessions and that would seem to give the market some technical ammunition for a low. There would seem to be little close-in resistance on the charts until $10.50 but a recovery to even numbers at $11.00 wouldn't be that surprising. Unlike gold, we suspect that silver aggressively pared its spec long position and that could significantly increase the odds that the major selling effort has run its course. However, as suggested in gold, the silver market "has" to have an improvement in daily equity market action to even think about throwing off the selling interest permanently. In fact, seeing the September silver fall back below the 200 day moving average at $9.83 into the end of the week, could still be very damaging to sentiment.

METALS TECHNICAL OUTLOOK 6/15/2006

COMEX SILVER (JUL) 06/15/2006: Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The market's short-term trend is negative as the close remains below the 9-day moving average. It is a slightly negative indicator that the close was lower than the pivot swing number. The next downside objective is 941.1. With a reading under 30, the 9-day RSI is approaching oversold levels. The next area of resistance is around 991.0 and 1011.0, while 1st support hits today at 956.1 and below there at 941.1.

COMEX GOLD (AUG) 06/15/2006: Daily stochastics are trending lower but have declined into oversold territory. The close below the 9-day moving average is a negative short-term indicator for trend. It is a slightly negative indicator that the close was under the swing pivot. The next downside target is 558.4. The 9-day RSI under 20 suggests the market is extremely oversold. The next area of resistance is around 571.5 and 578.5, while 1st support hits today at 561.5 and below there at 558.4.

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