GOLD:
GOLD MARKET FUNDAMENTALS: With a major brokerage firm coming out bullish toward the precious metals (bearish toward the base metals) and some players suggesting that the Fed may "struggle" to successfully contain inflation, there appears to be at least a couple opinions on the action in gold into the coming FOMC meeting. If the Fed is unable to contain inflation, that probably means they could over tighten and that probably wouldn't be a bullish outcome for the metals markets over the long run. However, the trade will probably see several market impacting stories from the annual London Bullion Market Association meeting, which according to Press reports will focus on Central bank gold purchasing potentials and the growing interest in silver. In a supportive story overnight, it was noted that 2 new Indian mutual fund companies were planning to launch GETFs so that investors in that country would have a new "supposedly" safer way to invest in gold. In a negative note, China floated stats that showed a 13.3% increase in gold production in the first four months of this year. Many traders expect the Dollar to be a key feature of the trade this week, and that might leave the market under a bit of suspicion. While the gold market has forged a pattern of higher lows off the June low, it continues to battle the prospect of a firming Dollar. In fact, with stories overnight focusing on the idea that the Fed is set to battle inflation, we have to think the potential for over tightening and a stronger US Dollar will generally leave the market with a fundamental limitation. While some brokerage firms have suggested that the Fed might be unable to contain inflation, that won't keep them from being overly aggressive and potentially failing to control inflation, which is initially bearish and the significantly bullish. In short, unless there is a sudden shift in fundamentals, to include talk of increased central bank buying, there is a renewed concern for US debt levels, or the stock market and energy markets begin to rise in sync, we will maintain a high degree of skepticism toward gold. The June 20th Commitment of Traders with Options report showed the Gold Non-Commercial position to be net long 85,474 contracts, with the Non-reportable position net long 36,357 contracts for a combined spec and fund long of 121,000 contracts. Therefore, the COT report hints at an overbought condition and the numbers are probably even understated due to the rally since the COT report was measured. Near critical support is seen down at $584.2 and then at $581. To turn bullish toward gold prices today might require a rise and close above $600.

SILVER:
SILVER MARKET FUNDAMENTALS: With the gold market positively biased overnight the silver market can at least partially discount the slide in copper prices. Apparently the silver market will be a topic of discussion at a gold conference in London and that might serve to bolster silver's investment appeal. However, both gold and silver will have to face the often daunting prospect of the upcoming FOMC meeting, which has already been preceded by a series of hawkish statements from a number of Fed members. In fact, with the looming FOMC meeting, it might be important for the silver market to see a resumption of the pattern of declines in US exchange stocks. With a moderate decline in stocks overnight there is at least some fundamental support under the market to start the week.
However, with copper prices lower this morning and world equity markets mostly mixed, the silver market needs a bullish flow of fundamental news just to keep the sellers at bay. It should also be noted that silver prices in the very early action today showed some moderate weakness that was summarily rejected by the trade. The June 20th Commitment of Traders with Options report showed the Silver Non-Commercial position to be net long 20,129 contracts, with the Non-reportable position also net long 20,662 contracts for a combined spec and fund position of 40,000 contracts. Therefore, the silver market starts the session this morning modestly spec long and probably only vulnerable in the event that the September silver falls below critical up trend channel support down at $10.06 today or $10.10 on Tuesday. In order to turn us distinctly bullish toward silver, would require a rise and close above $10.57, otherwise we have a tendency to worry about a negative impact from the Fed this week.

METALS TECHNICAL OUTLOOK 6/26/2006

COMEX SILVER (JUL) 06/26/2006: The stochastics indicators are rising from oversold levels, which is bullish and should support higher prices. The close above the 9-day moving average is a positive short-term indicator for trend. The upside daily closing price reversal gives the market a bullish tilt. The market has a slightly positive tilt with the close over the swing pivot. The next upside target is 1057.3. The next area of resistance is around 1046.5 and 1057.3, while 1st support hits today at 1010.5 and below there at 985.3.

COMEX GOLD (AUG) 06/26/2006: 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 upside closing price reversal on the daily chart is somewhat bullish. The close over the pivot swing is a somewhat positive setup. The next upside target is 599.3. The next area of resistance is around 595.2 and 599.3, while 1st support hits today at 580.8 and below there at 570.4.