GOLD:
GOLD MARKET FUNDAMENTALS: It is a little surprising that the outlook toward the economy was altered so dramatically by the Fed yesterday. However, the market seemed to make a large portion of the gains in advance of the Fed statement and that suggests the markets recognized their excess pessimism even before the Fed hinted at a pause in the rate pattern. While some market might need confirmation of the change in sentiment with some follow up action today, the gold market has already managed a rise back above critical resistance of $600 and seems to be back in an upward mode. Seeing better economic expectations and rising energy prices, without the Fed hanging around the neck of the markets, is certainly a combination that favors the bull camp. However, the US will float a long list of economic reports this morning that may or may not impact the trade. In any regard, the markets are acting as if the Fed gave the all clear yesterday, but it is still possible that the gold will want to see confirmation of growth from the numbers. In fact, it could take another inflation reading like the CPI to rekindle fears of the Fed. In conclusion, the gold market is back in a position to benefit from strong US numbers, gains in equities and gains in energy prices. While the market has managed a range up move to the highest level since early June in the overnight action, we are not convinced that conditions are such that the market is due huge and consistent gains. However, we concede to the upward bias, as the funds and the small specs now have reason to move back into the long side of the market. In order to fully restart the bull trend seen prior to the May top, might require consistent gains in the equity market and ongoing strength in oil prices. We suspect that August gold will attempt to make the $600 level solid support and that prices will settle into a range bound by $600 and $625. We also suspect that the market will feed on decent economic numbers. In order to shift gold into overdrive might require some rather significant declines in the Dollar or perhaps a significant flare-up in Middle East tensions. In the end, an improved macro economic outlook and significant military action in the Middle East should leave the bull camp in control.

SILVER:
SILVER MARKET FUNDAMENTALS: The silver market went along for the ride yesterday and seems to be catching the same wave again today in the early action. While many would suggest that the best bull market in silver is one built on inflation and flight to quality, the investment interest in silver now probably needs to see the potential for growth in the world economy, rising materials costs and a little currency uncertainty. While the Fed action yesterday doesn't preclude broad based commodity selling, the environment for such action has been tempered significantly. In fact, while the current market condition isn't as conducive as the environment that was seen prior to the May top, current conditions seem to be capable of prompting some sustained buying interest by both physical and investment players. Seeing ongoing gains in platinum and copper again this morning probably emboldens the bull camp and that could mean that the trade views the $10.00 level as a cheap price level. News that the Shanghai exchange might begin to trade silver later this year should also be supportive to silver, as that might broaden the appeal of silver in the world's most populous nation. The ISHARES Silver Trust showed an increase in trading volume with 632,400 shares traded yesterday, but to signal that the bullish mentality is fully back in vogue might require over a million shares of daily trade in the silver instrument. However, the silver market already has enough near term bullish items to continue to push prices upward. In fact, we suspect that the market is gunning for the $11.00 level and could easily make that level a solid support zone in next weeks action. As we have said a number of times over the last month, the best leading indicator for the bull camp is the direction of the equity market. Close-in support is seen at $10.62 and resistance today is probably seen up at $10.90.

METALS TECHNICAL OUTLOOK 6/30/2006

COMEX SILVER (JUL) 06/30/2006: Stochastics are at mid-range but trending higher, which should reinforce a move higher if resistance levels are taken out. The market's close above the 9-day moving average suggests the short-term trend remains positive. With the close over the 1st swing resistance number, the market is in a moderately positive position. The near-term upside objective is at 1058.9. The next area of resistance is around 1044.8 and 1058.9, while 1st support hits today at 1021.9 and below there at 1013.0.

COMEX GOLD (AUG) 06/30/2006: Stochastics are at mid-range but trending higher, which should reinforce a move higher if resistance levels are taken out. The close above the 9-day moving average is a positive short-term indicator for trend. A positive setup occurred with the close over the 1st swing resistance. The next upside target is 600.0. The next area of resistance is around 594.3 and 600.0, while 1st support hits today at 583.5 and below there at 578.3.