GOLD:
GOLD MARKET FUNDAMENTALS: Gold is tracking the Dollar these days and continues to lose ground as the Dollar gains. The PPI increasing 0.5 in June as opposed to 0.3 expected and the stronger than expected Industrial Production and Capacity Utilization numbers are evidence that the US economy is on a fairly positive track, and with the Fed Chairman speaking today, the trade appears to be on high alert for indications that another rate hike is imminent. After last week's rally, the market's focus has quickly shifted away from the hostilities in the Middle East. A declining crude oil market has also taken some of the urgency away from owning gold. It seems that with all the expectations of a rate hike, the Dollar bulls (and gold bears) could be disappointed if today's speech comes up short of hinting towards one. Likewise, a CPI number towards the lower end of the +0.2 to +0.4 expected range could do the same. The flight to quality argument has faded, but a surprise escalation of hostilities could bring it back. In the meantime it appears that crude oil is flowing and the world economies keep moving. As long as the Dollar is gaining and the Fed appears to be in a tightening mode, look for the gold to continue to break on long liquidation. As it is focused on the Dollar, the market seems to be counting heavily on strong inflationary readings and on the Fed tightening, so traders should be wary of disappointment on both counts. August gold fell through retracement support at 627.40 overnight. Given the size of the fund long position prior to the break, we would be inclined wait for a break to the next retracement level of 611.90 before looking at the long side.

ISHARES SILVER TRUST: The last trade was at 105.95, down 3.02 (2.77%) from the previous close with the volume at 470,800.

SILVER:
SILVER MARKET FUNDAMENTALS: Silver fell again yesterday on continued long liquidation. Like gold, silver appears to be tracking the dollar these days and is losing ground as the dollar gains on anticipation of a Fed rate hike. It's also possible that traders are fearful that the economic effects of a Fed tightening would undermine industrial demand for silver. However, the stronger than expected economic readings this week that have added credence to the anticipation of a rate hike also would suggest that the economy and industrial demand are on firm ground. The trade will be watching the CPI number for further inflationary data with expectations centering around a reading of +0.3, as well as the Fed Chairman's talk later this morning. September silver has not wasted time in falling to major retracement support at 10.503, but we anticipate some fairly good technical support at the 10.00-10.50 consolidation range from mid to late June. Look for further weakness ahead of the Fed Chairman's talk today, but be aware that the market could bounce if expectations for rate hike talk are not fulfilled.

METALS TECHNICAL OUTLOOK 7/19/2006

COMEX SILVER (SEP) 07/19/2006: Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The intermediate trend has turned down with the cross over back below the 18-day moving average. There could be some early pressure today given the market's negative setup with the close below the 2nd swing support. The next downside objective is now at 994.8. The next area of resistance is around 1089.5 and 1142.8, while 1st support hits today at 1015.5 and below there at 994.8.

COMEX GOLD (AUG) 07/19/2006: The market back below the 60-day moving average suggests the longer-term trend could be turning down. The daily stochastics have crossed over down which is a bearish indication. Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The market's close below the 9-day moving average is an indication the short-term trend remains negative. There could be some early pressure today given the market's negative setup with the close below the 2nd swing support. The next downside objective is 609.4. The next area of resistance is around 642.7 and 662.3, while 1st support hits today at 616.3 and below there at 609.4.