GOLD:
GOLD MARKET FUNDAMENTALS: While the August gold managed an impressive overnight pulse up to the highest level since June 16th, the market was unable to hold all of those gains. Apparently the reports of physical buyers stepping up in China for gold might have provided the rally overnight, but other traders are suggesting that flight to quality buying was also present in the action this morning off the North Korean missile test. News that Harmony Mine moved to acquire over 1/3rd of an African gold mining concern would seem to suggest that some mining executives still view current values in the gold sector as undervalued and that might be supportive of gold futures. The news that Iron ore prices were being raised again, could also suggest that recent weakness in many base metals and the precious metals markets has run its course. However, in order to fully downplay the threat of broad based selling in physical commodity markets, the trade might have to come to that conclusion world equity markets are poised for a recovery. On the other hand, the patently negative posture toward the physical commodities does seem to have mitigated (at least from the sentiment that was seen in the first two weeks of June) and that might reduce the bear's ability to dominate the gold trade. While the market appears to be building a weak pattern of higher lows on the charts and the market managed an initial rally this morning, we are not sure that the trade is ready to puff up gold prices. It is a positive that Mining Shares showed some strength overnight and if the US Dollar does manage to fall back below 85.25 that could stimulate a fresh buying wave. In the near term, August gold should have decently solid support at $575 and then again at $572.4, with resistance seen at $584. A minor upward bias is seen today, but we doubt that the market will get the news to take out that $584 resistance point on the charts.

SILVER:
SILVER MARKET FUNDAMENTALS: While copper prices are slightly higher today and there is a certain amount of bullish buyout buzz supporting the platinum market, it would seem like silver prices are set to track gold instead of the physical metals. It is unfortunate for the bull camp that silver is looking toward gold rather than platinum and copper, as increased Iron Ore prices overnight would seem to provide support to physical demand driven metals markets today. Silver IShares volume yesterday was 295,400 shares, which is a little low considering the rally in silver prices yesterday but those shares did manage to gain nearly 3.41% from the previous close. However, exchange stocks of silver continue to decline, but recently the rate of decline has slowed and that might be robbing the silver futures of more aggressive supply themed buying. Ongoing vulnerability in the equity market also seems to be keeping the bear camp in silver on the sidelines and therefore players might consider a slide below 1247.30 in the September S&P in the near term, as a partially negative development for silver. While the silver market did manage a new high for the move overnight, the rally was limited and many traders were disappointed that the September contract failed to take out the June 16th high of $10.45. However, as long as September silver manages to hold above $10.28, the market should remain positively biased. In fact, with a pattern of higher lows on the charts, the bull camp does seem to have a positive track this morning but we can't help but think gains will be limited until the markets get their focus off the fear of rising interest rates. Be lightly long but defensive, in fact being long futures and short near to expiration calls seems to make sense.

METALS TECHNICAL OUTLOOK 6/21/2006

COMEX SILVER (JUL) 06/21/2006: The stochastics indicators are rising from oversold levels, which is bullish and should support higher prices. The market's short-term trend is negative as the close remains below the 9-day moving average. 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. The near-term upside target is at 1056.0. The next area of resistance is around 1046.0 and 1056.0, while 1st support hits today at 1008.1 and below there at 980.1.

COMEX GOLD (AUG) 06/21/2006: Rising from oversold levels, daily momentum studies would support higher prices, especially on a close above resistance. The market's close below the 9-day moving average is an indication the short-term trend remains negative. A positive signal was given by the outside day up. With the close over the 1st swing resistance number, the market is in a moderately positive position. The next upside objective is 590.6. The next area of resistance is around 587.1 and 590.6, while 1st support hits today at 573.9 and below there at 564.3.