GOLD:
GOLD MARKET FUNDAMENTALS: Today is expected to be a very pivotal day for gold as the rally off the June lows has started to restore the bull camps dominance and the numbers today could enhance or defeat that condition today. With Financial markets this week downgrading the prospect of significant US tightening, the Dollar has been put off balance. However, the numbers this morning could easily re-awaken the Dollar. With the recent downgrade of US economic expectations there is the potential for gold to come under liquidation pressure and that potential might increase in the event that US Non Farm payrolls fail to rise by 140,000 jobs. On the other hand, a private pay check company survey suggests that the report today could bring on a big surprise, with a much above expectation gain in jobs and that type of number is expected to bring the Fed back off the bench with additional rate hikes. Therefore gold traders need to watch the early numbers closely today. While the North Korean situation retains the capacity to lift gold prices, we suspect that element is set to drift into the back ground. In the early action today, it is clear that some players are banking profits on longs ahead of the report but that is probably a money management decision instead of an indication of what the numbers will be. Reports in India of surging gold demand are helping to underpin the gold market against a minor early liquidation wave, but technical analyst suggest that August gold will have a critical inflection point around the $625 to $619.5 level this morning. Other traders suggest that gold will only begin to react aggressively, if the US Dollar comes out of an 85.42 to 84.59 trading range. While gold has managed a pattern of higher lows and higher highs this week, upside momentum has waned directly ahead of the US payroll report this morning. While we get the sense that some weak handed longs are set to exit or will be forced out on the slightest weakness in the numbers today, there is a decent chance that the numbers could usurp the upper range of expectations and then the reaction of the gold market won't be that clear. In fact seeing numbers that bring the Fed back off the bench and in the process sends the Dollar soaring, might actually dominate the gold market over the obvious physical demand improvement that might result from a strong number. Near term upside targeting remains $650 in the August contract, but we can't help but be concerned about a temporary dip down toward an old gap area of $618 to $619. In short, those that are long should stay long, those not long, should look to get long on a decline to $618.

SILVER:
SILVER MARKET FUNDAMENTALS: Like the gold market, silver has balked somewhat directly ahead of the US Non-Farm payroll report. It seems that the trade is attaching much significance to the readings today, as the trade has somewhat solidified the idea that the US Fed is indeed on hold with respect to interest rates. Therefore, the silver market is concerned that the numbers today could alter the existing on-hold Fed view. However, the silver market doesn't seem to be overly vulnerable to long liquidation, as recent equity market strength and gains in outside markets like copper, have firmed up demand expectations for silver and perhaps even more importantly, recent developments seem to have brought the funds and investors back to the long side of silver. Therefore, it would seem like silver is in a position to weather a slightly weak payroll number and would be energized by a stronger than expected payroll reading. With a minor decline in exchange stocks overnight, following a rather significant build yesterday, the silver market seems to have lost the near term bullish supply focus that was developing last week. Many traders think that September silver has significant chart support at even numbers of $11.00, while other techies are concerned that this week's gains were made on declining volume and open interest figures. While the silver market seems to have entrenched above the $11.00 level, we are somewhat concerned about the lower volume and open interest pattern on the recent rally. There is an old gap on the charts down at $11.20 to $11.13 and that area could easily be filled today in the wake of a soft payroll reading. It is also possible to see an ultra strong payroll reading apply pressure to silver prices, but we are doubtful of that result. We think the overall up trend pattern in silver will remain intact through the action today but we suspect that some early weakness will be seen.

METALS TECHNICAL OUTLOOK 7/7/2006

COMEX SILVER (SEP) 07/07/2006: Rising stochastics at overbought levels warrant some caution for bulls. The market's close above the 9-day moving average suggests the short-term trend remains positive. A positive setup occurred with the close over the 1st swing resistance. The near-term upside target is at 1188.3. The next area of resistance is around 1176.5 and 1188.3, while 1st support hits today at 1140.5 and below there at 1116.3.

COMEX GOLD (AUG) 07/07/2006: The cross over and close above the 40-day moving average is an indication the longer-term trend has turned positive. Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The market's short-term trend is positive on the close above the 9-day moving average. Market positioning is positive with the close over the 1st swing resistance. The near-term upside objective is at 645.0. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 641.9 and 645.0, while 1st support hits today at 630.7 and below there at 622.7.