GOLD:
GOLD MARKET FUNDAMENTALS: While the gold market has managed to reject the probe down to $602 earlier this week, the Press is starting to carry stories suggesting that the market is caught in a trading range. Overnight the Asian Press suggested that gold trading was seeing interest taper off and that might give the bear camp a bit of a near term edge. In an additional negative note, stock analysts have downgraded Barrick gold because of a buyout offer for NovaGold and therefore it seems that the investment psychology for gold has turned a little negative. It is likely that the Fed's Beige Book analysis will play up the theme of ongoing growth and contained inflation and that should generally support physical demand driven commodities, but there is always the chance that some gold players could be discouraged by the mostly under control inflation environment. In yet another negative overnight fundamental story, Russian 1st half gold production apparently rose 2.9% to 57 tons. In short, the supply news seems to be generally bearish, the investing environment seems to favor the bear camp and the situation in the Middle East could also favor the bear camp as the push is on for some form of cease fire. From the charts it would seem like August gold is hemmed in by $625 resistance and $600 support on the charts. It is positive that the big up day this week brought about an up tick in trading volume, as that would seem to leave volume and open interest analysis in the bull's camp. On the other hand, the trade doesn't seem to be overly interested in the market, despite a series of very positive gold company earnings reports. Unless something fresh unfolds from the Middle East, we can't rule out more choppy action between $600 and $625 basis the August contract. Pushed into the market today, we would sell a slight bounce to $625 but those looking for a sustained position play should be waiting for a break down to $606 to get long.

SILVER:
SILVER MARKET FUNDAMENTALS: With investment dialogue somewhat softening toward platinum and gold shares, silver stocks stagnant and copper providing only minimal direction, the silver market seems to remain in a slightly positive fundamental posture. However, the silver market might need somewhat more positive action from world equity markets, or from the US Fed Beige Book readings today, just to maintain its recent positive bias on the charts. In other words, while silver has recently paid more attention to flight to quality or financial developments, the silver market should still be impacted by the ebb and flow of the US economy. In fact, the silver market is still periodically viewed as a physical or industrial commodity and therefore the tone of the Fed statements this afternoon could be very important to the silver market. The market continues to maintain a pattern of higher lows on the charts, but sagging volume and open interest patterns seem to point to a tightening of daily trading ranges ahead. While the silver market has followed gold extensively this week, we now suspect that silver is set to track the copper market. Near term channel support on the charts comes in today at $10.66 and closer-in support is seen at $10.80. In the end, the trend is still up but the momentum of the bull track is minimal at best.

METALS TECHNICAL OUTLOOK 7/26/2006

COMEX SILVER (SEP) 07/26/2006: The moving average crossover down (9 below 18) indicates a possible developing short-term downtrend. 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 mildly bullish indicator that the market closed over the pivot swing number. The next downside target is 1066.3. The next area of resistance is around 1108.5 and 1122.3, while 1st support hits today at 1080.5 and below there at 1066.3.

COMEX GOLD (AUG) 07/26/2006: The cross over and close above the 40-day moving average indicates the longer-term trend has turned up. Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. A negative signal for trend short-term was given on a close under the 9-bar moving average. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next downside objective is now at 604.7. The next area of resistance is around 624.2 and 629.6, while 1st support hits today at 611.8 and below there at 604.7.