GOLD:
GOLD MARKET FUNDAMENTALS: Apparently seeing the US home sales data come in stronger than expected and seeing rumors of a 50 basis point rate hike by the US Fed wasn't capable of keeping gold down in the action Monday. In other words, gold came under pressure but was able to shake off the pattern and firm into the close. While the reversal of early gains was defeating for the bull camp yesterday, the recovery into the close Monday served to balance sentiment considerably. In fact with a number of markets were under liquidation pressure yesterday the metals recovery had to put the bear camp off slightly. It is likely that the metals market will remain under the cloud of suspicion into the Fed decision on Thursday and therefore it might be incumbent on the bull camp to see numbers that avoid projecting too much weakness in the economy but aren't so strong that they support the Dollar. Overnight Newmont Mining predicted that gold would begin to rise again in September, with that forecast apparently predicated on the assumption that the Dollar would begin to slide again in September. It should be noted that energy prices have firmed again and as long as that doesn't serve to derail the equity market, one might suggest that the bull camp is getting itself back into the posture that fostered the December through May rally. A pattern of higher lows and a progression back toward the psychological level of $600 appears to have left the gold bulls with a bit of a technical edge. As mentioned already, the gold will need to walk a thin line, between seeing strong numbers that support a view of ongoing US growth and seeing too much growth and a stronger Dollar. We get the sense that the gold market has already factored a 25 basis point hike and has also factored hints of more future hikes. However, if the Fed turns up the rate hike dialogue a notch further, that could propel the Dollar back toward the recent highs and in turn start to undermine the gold market again. Around mid session Monday, the metals markets were potentially ready to fall into the broad based commodity liquidation pattern again but surprisingly were able to extract themselves from that fate. In order to continue avoiding liquidation pressure, the gold market has to get the sense that the economy can grow in the face of rising energy prices and rising interest rates and that can be a difficult combination. We see solid support at $584.5 and close-in resistance at $600 but we also concede to a minor upward bias. However, to go through the coming three sessions (FOMC on Thursday) without a dip back to $575 might be a lot to ask.

SILVER:
SILVER MARKET FUNDAMENTALS: While the silver market has managed a series of higher lows on the charts (like the gold market), the trade is watching the copper market closely. In fact, with the copper market showing a choppy to lower trade this morning and ISHARES trading volume really leveling off yesterday, it seems that the investment buzz toward silver and copper is cooling somewhat. However, traders should remember that the London Bullion Association meeting is expected to address the rising interest in silver this week and that could serve to provide silver with an important lift. It was quite supportive of the bull case yesterday to see silver manage to reject significant weakness at mid day yesterday, as the bear camp is forced to respect the opposition. Fundamentally, it will still be important for the bull camp to see exchange stocks drop below long held psychologically important levels, as that could insinuate ongoing tightness in supply. Most traders expect silver to be at least partially undermined by upcoming data and as a result of the upcoming FOMC meeting, and for that reason the market will continue to carry a vulnerable feel. However, seeing the stock market and energy markets rise in sync again could put the metals markets back in a similar posture that inspired the run to the May highs. With a pattern of higher lows on the charts and the market able to repel the sellers yesterday, the bear camp is somewhat off their game. However, we continue to think that the bear camp will have an edge over the coming three sessions as the Fed is seen as their friend. As the NewMont Mining executive suggested, gold will rally again in September (after the Fed is expected to be done), and therefore we also think the metals will rally again, but only after the Fed gets off the metals market's back. We do think that the recent trip below $10.00 was clearly rejected and therefore we have probably found a solid value zone on the charts. However, in the coming three sessions we can't rule out a temporary slide back down to $10.06 but the market still seems to be capable of regaining $11.00 within the coming 5 to 6 sessions. In order to rise directly to $11.00, might require a decline in exchange stocks below 100 million ounces, a sharp rise in equities and less perhaps concern that the Fed is set to over tighten.

METALS TECHNICAL OUTLOOK 6/27/2006

COMEX SILVER (JUL) 06/27/2006: Daily stochastics are showing positive momentum from oversold levels, which should reinforce a move higher if near term resistance is taken out. The market's close above the 9-day moving average suggests the short-term trend remains positive. The market could take on a defensive posture with the daily closing price reversal down. It is a mildly bullish indicator that the market closed over the pivot swing number. The next upside target is 1054.3. The next area of resistance is around 1040.5 and 1054.3, while 1st support hits today at 1007.5 and below there at 988.3.

COMEX GOLD (AUG) 06/27/2006: Daily momentum studies are on the rise from low levels and should accelerate a move higher on a push through the 1st swing resistance. The market's short-term trend is positive on the close above the 9-day moving average. The close over the pivot swing is a somewhat positive setup. The near-term upside objective is at 595.7. The next area of resistance is around 592.4 and 595.7, while 1st support hits today at 583.0 and below there at 576.8.