GOLD:
GOLD MARKET FUNDAMENTALS: In the near term, the gold market is locked on the prospect of a regional conflict in the Middle East. With oil prices forging persistent new high moves and the markets justifiably concerned about an escalation of tensions, it is not surprising to see paper assets dumped and gold and silver holdings to come into even more favor. In fact, an international futures exchange overnight suggested that the current environment makes it easier to trade commodities off fundamentals, than it is to trade equities off the fundamentals. With the August gold reaching the highest level since May 31st in the overnight action, the market seems to be moving away from the last critical chart zone of $650 and has some traders thinking that the market is now headed to the $675 level. Some traders have suggested that the negative impact off a rising US Dollar will be mostly discounted until the US Dollar manages a rise above the late June highs up around the 86.68 level. One has to wonder if the US will attempt to link Iran to the current tensions, or if Syria will be pulled into the equation. In the near term, the classic fundamentals of physical supply & demand, simply look to take a back seat to psychological and flight to quality buying interest. Countervailing some of the near term bullishness in gold overnight are comments from RandGold that gold prices might actually soften over the next two years but apparently the South African gold company first thinks that gold prices will manage to climb to $700 an ounce. With volume and open interest rising in sync with the price of gold and the market definitively feeding higher off the developments in Lebanon, one has to concede to a bullish tilt. In fact, the flight to quality focus is so intense that the potentially negative BOJ rate hike overnight looks to be mostly ignored. In fact, under the current environment, the bull camp might not even be deterred by evidence of softening in US scheduled numbers. Surprisingly the US equity market is making a bit of a bounce overnight and therefore soft US economic numbers this morning might be easily discounted in the action today. Some traders might suggest that there will be little resistance in August gold until the market reaches $668, with the,, next psychological upside target coming in at $675. For the time being, the trend is up and support should be solid at $657 and $650.

SILVER:
SILVER MARKET FUNDAMENTALS: The silver market remains positively biased into the opening today, but with the market still holding below the week's high, it is clear that silver is getting less overall flight to quality buying than the gold market. In other words, the silver market is being "supported" by the Middle tensions, but apparently there are some reservations on the economy and the fear that soaring oil prices are going to end up slowing the economy and slowing the demand for many physical commodities. In fact, with September silver unable to rise above this week's high of $11.82 over the last two sessions, the bull camp has to be a little disappointed. In the end, the financial or flight to quality aspect of silver appears to be battling just to offset negative macro economic concerns. On a positive note, the September silver has still managed to respect a pattern of higher highs and higher lows on the charts, and would also seem to have a generally positive chart pattern, but for the time being, it would seem that raging tensions in the Middle East are necessary, just to avoid a setback in silver prices. We see extremely critical support in the September silver this morning at $11.60, with initial resistance pegged at $11.82. Pushed into the market, we would have to favor the long side but our gut tells us that risk to the longs is rising and that the lagging nature of silver to gold, could mean that silver market will come under the most liquidation pressure in the event that Middle East tensions somehow cool down or the outlook for the global economy is seriously downgraded. Support off the up trend channel pattern in September silver, comes in today at $11.29 and that means the market could fall quite considerably without really damaging the charts.

METALS TECHNICAL OUTLOOK 7/14/2006

COMEX SILVER (SEP) 07/14/2006: The close under the 40-day moving average indicates the longer-term trend could be turning down. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market tilt is slightly negative with the close under the pivot. The near-term upside target is at 1181.5. The next area of resistance is around 1164.0 and 1181.5, while 1st support hits today at 1133.1 and below there at 1119.5.

COMEX GOLD (AUG) 07/14/2006: 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. The close over the pivot swing is a somewhat positive setup. The near-term upside target is at 662.9. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 659.4 and 662.9, while 1st support hits today at 649.4 and below there at 643.0.