GOLD:
GOLD MARKET FUNDAMENTALS: As suggested in the overnight market summary, the Asian trade in gold was bidding up prices slightly off the hope that the upcoming Fed hike would be the last in the cycle. A number of recent private forecasts calling for gold to recover in September are being seen and that view seems to be derived from the idea that the US Fed will certainly be done hiking rates by then. The London Bullion Market Association conference is sparking the usual bullish forecasts for gold, with a participant poll at that conference, pegging the price of gold to be $698.60 per ounce by November of 2007. In short, the market seems to have solidified itself after the sharp May and June slide. In fact, with a moderate amount of bullish sentiment surfacing in the Press and the bear camp being taken to task with a $54 rally off the June lows there is some reason to view support levels on the charts with more respect. However, many traders remain fearful of a 50 basis point rate hike and that could spark a fresh rally in the Dollar which in turn could undermine physical demand expectations, off the fear that the Fed was going to far too fast in slowing the economy. Therefore, the gold market probably remains under a cloud of suspicion for the coming two sessions. Near term critical support in the August gold might be pegged at $581 and resistance is still seen up at $600. With a partially supportive LBMA conference forecast of $698 gold next year, a US exchange looking to start gold futures trading in China and Indian newspapers carrying stories that suggest demand for gold is set to strengthen again, there appears to be a fundamental underpin for gold prices. However, one has to concede to some vulnerability in the coming two sessions, especially if the Fed fosters ideas of more hikes in the future with their statement on Thursday. In the near term, buying support might be considered to be $575 but those looking for a position buy, might consider holding out for a post FOMC break down to $564 basis the August contract.

SILVER:
SILVER MARKET FUNDAMENTALS: While volume and open interest managed to partially confirm the recent rally with some gains, the trading activity in the IShares remains somewhat light at 521,000 shares on Tuesday. After a big decline to start the week, exchange stocks of silver have leveled out and even managed to rise a bit. Supposedly fund buying in silver on Tuesday, was thought to be lifting the gold market and that has to be a little uncomfortable for the bear camp. One might also note that the clear pattern of higher lows on the charts has dissipated slightly and that might be hinting at a loss of bull momentum. However, it is probably logical to expect the market to tighten its range into the uncertainty of the Fed meeting and therefore one might expect the recent trading range of $9.81 to $10.65 to hem in the trade. Somewhat weaker expectations for platinum prices and disappointing recent price action in copper, would seem to turn up the threat of liquidation in silver but to see a full selling attack on silver again, might require a sharp slide in the equity market, as the bull camp seems to have made a statement with the June rally of $1.23 per ounce. We suspect that the market will be able to respect chart support of $10.00 today, but into the Fed decision on Thursday, the silver market might be confronted with temporary liquidation pressure and a dip to $9.81. In order to thoroughly throw off the liquidation tilt, the US equity market has to signal an "all clear" on the rate hike front and that might be a difficult undertaking. The Press is suggesting that spot silver support is strengthening down at $9.80 and volume and open interest patterns give those predictions some credence. Pushed into a short term trade, we would be short on 5-10 cent rallies but those that are short had better be ready to bank profits on steep slide this week, as we think the early June lows are set to hold.

METALS TECHNICAL OUTLOOK 6/28/2006

COMEX SILVER (JUL) 06/28/2006: 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 market could take on a defensive posture with the daily closing price reversal down. It is a slightly negative indicator that the close was under the swing pivot. The near-term upside target is at 1073.8. The next area of resistance is around 1041.5 and 1073.8, while 1st support hits today at 997.5 and below there at 985.8.

COMEX GOLD (AUG) 06/28/2006: Rising from oversold levels, daily momentum studies would support higher prices, especially on a close above resistance. The close above the 9-day moving average is a positive short-term indicator for trend. The daily closing price reversal down puts the market on the defensive. It is a slightly negative indicator that the close was lower than the pivot swing number. The near-term upside target is at 603.1. The next area of resistance is around 592.0 and 603.1, while 1st support hits today at 576.8 and below there at 572.6.