GOLD:
GOLD MARKET FUNDAMENTALS: With the market falling back below a critical chart point of $628.5 in the overnight action and in turn posting enough of a decline to get the Press and trade's attention overnight, it would seem that the gold market is reversing some of the gains made directly in the wake of the Bernanke testimony. While tensions in the Middle seem to remain fairly tense, the gold market isn't apparently ready to factor in additional flight to quality premium early in the action. In fact, even the crude oil market is showing an inattentive reaction to the prospect of a ground invasion by Israel. Apparently the general consensus is that the UN and other political pressures might prevent the next escalation. However, the Israel response is that it is nearly impossible to have a cease fire agreement with terrorists. In fact some sources suggest that, as long as the missile launches continue, the potential for a major ground assault will be high. In a positive technical note, analysts have suggested that as gold prices slid back this week, volume and open interest both seemed to tail off and that can sometimes suggests that the trade isn't wholly supportive of the downward price tilt. With a slight failure on the charts this morning below that critical pivot point of $628.5, the gold market might be set to flirt with the $525 level later in the morning action. Near term support and perhaps a target in the morning trade is initially $628.9. There is also a gap area on the charts down at $619.5 to $618, and some suggest that it might be necessary to fill that gap before attempting another general move upward. In short, we fear morning weakness, but it would not be surprising to see both gold and energy prices rise toward the close today in a speculative play for the weekend, especially if the news this morning increases the prospects of a ground battle.

SILVER:
SILVER MARKET FUNDAMENTALS: While the silver market has held most of the gains forged off this week's lows, it would seem that the tight positive correlation with gold is waning slightly. However, a lack of positive correlation today seems to be allowing silver and copper prices to show some early strength in the face of initial gold pressure. In other words, it would seem like silver and copper are attempting to track the direction of the World equity market, while the gold market is apparently tracking other issues, perhaps technical in nature. On the other hand, September silver does seems to be having trouble holding above critical close-in chart support of $11.00, and some traders have suggested that the market has significant overhead resistance on the charts from the first half of the months trading action. With the September silver gyrating around the $11.00 level on five or six separate occasions in the last 4 1/2 months it certainly seems like that level has become a fair value zone. With the rejection of the slide to $10.50 early this week and the failure to rise above $11.77, the market seems to be caught in a $11.00 to $11.50 range until there is a better economic expectation or more distinctly positive leadership from the gold market. We can't rule out dips back to $10.83 (the overnight low) and we also can't rule out a more distinct correlation with equity prices in the action today. In fact, now that the equity market has factored the positives from the Bernanke show this week, it could be important for the stock market to find other fresh supportive elements, or physical demand driven commodity markets like silver and copper, could find it difficult mount much in the way of an upside move. In a Press article this morning, an analyst suggested that silver ETF's were only a manifestation of investor interest in silver and not a primary driven force for the move and that should highlight the broad based interest in the silver market. Pressed into the market today, we would feel better about selling rallies to $11.30, than we would about buying breaks down to $10.83.

METALS TECHNICAL OUTLOOK 7/21/2006

COMEX SILVER (SEP) 07/21/2006: Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. The market's close below the 9-day moving average is an indication the short-term trend remains negative. The downside closing price reversal on the daily chart is somewhat negative. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next downside objective is 1077.1. The next area of resistance is around 1124.0 and 1147.0, while 1st support hits today at 1089.1 and below there at 1077.1.

COMEX GOLD (AUG) 07/21/2006: The market back below the 60-day moving average suggests the longer-term trend could be turning down. Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. A negative signal for trend short-term was given on a close under the 9-bar moving average. It is a slightly negative indicator that the close was under the swing pivot. The next downside objective is now at 620.3. The next area of resistance is around 639.6 and 649.0, while 1st support hits today at 625.3 and below there at 620.3.