GOLD:
GOLD MARKET FUNDAMENTALS: On several occasions this week the mainstream Press has carried stories of mostly resilient gold demand and that seems to capable of holding together in the face of mostly vulnerable price action. However, while it appears that gold has benefited from a slight improvement in the macro economic outlook this week, there continues to be quite a bit of skepticism toward the market. In fact, technical analysts and those in the bear camp are conceding the capacity for a normal corrective bounce all the way back up to $620 without conceding to the end of the down trend pattern in effect since the May high. (that price point is apparently derived from standard corrective measures off the May through June slide in prices). In other words, the bears explain away the recent bounce in prices, as a mere balancing of the steep slide in prices over the last two months. However, the bulls have suggested that the core of the bull case, (strong physical demand and flight to quality issues) remain in place and that a slight improvement in the macro economic outlook serves to justify the recent bottoming attempt. However, there is a general sense in the market that the bear camp retains a minor edge and that is probably facilitated by the presence of the US FOMC meeting next week. Another apparent edge from the bear camp this morning, is the fact that the Dollar has broken out to the upside again and may remain in favor through the June 28th FOMC meeting date. Another issue that seems to be coming out in favor of the bear camp today, is chopper to lower action in copper and platinum but the bull camp also has to be disappointed with the ongoing general malaise in the equity market. However, the gold market seems to be prepared to end the week with somewhat less negative psychology than was present prior to the key June low. With another new high for the move in the Dollar and perhaps a minimally negative durable goods report due out today, we have to be concerned about some weakness in gold prices today. Certainly it is supportive that gold has managed to carve out a pattern of higher highs since the June spike low. However, the gains made in gold this week clearly came in the wake of positive equity market action and until the equity market manages to make even more bullish noise, with an upside breakout above 1268 in the September S&P, we will view the gold market as a vulnerable market. It is possible that attitudes toward gold will improve even further (after the Fed), but in the mean time traders should be defensive and shouldn't rule out the capacity to fall right back down to $569 basis the August. In fact, as we have suggested for almost a year now, the fate of the gold bull market is directly linked to the stock market/economic view. With the added burden of a rising Dollar today, the bulls will have to battle to hold ground.

SILVER:
SILVER MARKET FUNDAMENTALS: With the silver market already in the midst of a rather significant corrective slide from yesterday's highs the onus might be on the bull camp to prove that they can repel selling pressure. As suggested in the gold commentary this morning, all of the metals markets are fighting a higher Dollar, slack macro economic attitudes and in some cases concerns of slowing from less accommodative global monetary policies. It would also seem like the silver bulls are being somewhat let down by the action in the copper market, which continues to be a key leadership market for silver. Even the supply situation seems to have lost some of its recent bullishness, as the pattern of daily exchange stock declines appears to have leveled out recently. In a final piece of relevant overnight news, it seems that the volume of trade in the silver IShares instrument has tapered off. While the Dollar action could be a major influence for silver today, the US durable goods report is also expected to be a little discouraging to the market. While the silver market has mounted a series of higher lows and higher highs this week, the September contract comes into the US trade this morning roughly 50 cents below the Thursday high! While we wouldn't be surprised to see the silver manage another new high today, we would, if pushed into the market prefer to be short from $10.50 but only for a short term trade. In fact, the bear camp might only have another 3 or 4 sessions of protection from the Fed and then it is possible that macro economic attitudes improve and silver is then capable of clawing its way back above $11.00.

METALS TECHNICAL OUTLOOK 6/23/2006

COMEX SILVER (JUL) 06/23/2006: The stochastics indicators are rising from oversold levels, which is bullish and should support higher prices. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market could take on a defensive posture with the daily closing price reversal down. The market setup is somewhat negative with the close under the 1st swing support. The near-term upside target is at 1059.8. The next area of resistance is around 1037.5 and 1059.8, while 1st support hits today at 1004.5 and below there at 993.8.

COMEX GOLD (AUG) 06/23/2006: The stochastics indicators are rising from oversold levels, which is bullish and should support higher prices. The market's short-term trend is positive on the close above the 9-day moving average. The market could take on a defensive posture with the daily closing price reversal down. The market tilt is slightly negative with the close under the pivot. The next upside target is 596.2. The next area of resistance is around 589.9 and 596.2, while 1st support hits today at 580.9 and below there at 578.2.