GOLD:
GOLD MARKET FUNDAMENTALS: The gold market seems to be getting a pretty good shake from most developments overnight, as softer US numbers are being matched off with a weakening Dollar and periodic readings that are better than expected. With some gold mining companies posting stellar earnings (AngloGold earnings rose by 63%) it is likely that gold investment in general is being upgraded in the minds of some investors. Furthermore, the Press is rife with stories of frustrated buyers who were unable to pick up fresh long positions on the recent slide at levels considered to be cheap. In short, the trade and investors were in a buying mode on the recent decline in prices, and that can be a hallmark of a bull market. It should also be noted that US equities and oil prices have slipped back into a positive correlation over the last few sessions and that was a very powerful condition in gold prior to the May top! However, many traders credit the sharp rise this morning to the Dollar decline which in turn was fostered by muted economic outlet in the US Beige book. On the other hand, many traders think that the weak Dollar pattern will be short lived and that the Dollar will soon re-gather itself. However, there is a sense this morning that persistent gains in energy prices are once again poised to stimulate inflationary psychology and with the war in Lebanon apparently being allowed to continue, there would seem to be a number of flight to quality reasons prompting gold buying this morning. While the big upward thrust in prices overnight leaves the gold market somewhat short term overbought, the bullish fundamental factors are numerous. We are really impressed by the combination of gains in the equity market and the oil market and equally impressed by the talk that inflation is still a threat regardless of the Fed's comfort zone. While a weaker Dollar is apparently a major element in the overnight action, we are not sure that is a situation that will remain in place for long. On the other hand, the gold market is in favor this morning and buyers are apparently willing to pay up, especially after a portion of the trade was thought to be waiting to buy gold below the $600 level and now they are being forced to chase the market with buy orders. Near term upside targeting could be $639.4 and close-in support is seen at $628.3.

SILVER:
SILVER MARKET FUNDAMENTALS: The silver market seems to be in much improved position (as compared to July 18th and 19th when the market tested the $10.50 level). Last week the silver market was concerned about significant US slowing and was also concerned that the US Fed was going to continue hiking interest rates. While the silver market still can't be sure that the Fed will indeed be on hold in August, sentiment is currently accepting of a pause and that has seemingly allowed for some economic optimism to return and in turn has undermined the US Dollar. With the stock market also rising in sync with the oil market and the trade seeing some flight to quality buying off the Middle East situation, there is simply a number of different bull themes operating in the headlines. With a moderate recent decline in exchange stocks, periodic better than expected US economic reports and generally positive leadership from the copper market, the silver market seems to have positive traction. However, it is also clear that the silver market continues to track the gold market instead of the industrial or physical commodity fundamentals. While the silver market has made some impressive gains over the last 24 hours, the market has just barely surpassed the middle of the last months trading range at $11.14. In fact, until the September contract manages a rise above $11.34 we wouldn't even label the gains as significant. Given all the positive fundamental news it would not be surprising to see September silver re-test the top of the July range up at $11.77 to $11.82 in the coming two sessions. However, in order to see an upside breakout, the pattern of higher equities and higher oil prices might have to entrench. Close in support in September silver today is pegged at $11.05.

METALS TECHNICAL OUTLOOK 7/27/2006

COMEX SILVER (SEP) 07/27/2006: The cross over and close above the 40-day moving average indicates the longer-term trend has turned up. Declining momentum studies in the neutral zone will tend to reinforce lower price action. The market's close above the 9-day moving average suggests the short-term trend remains positive. It is a mildly bullish indicator that the market closed over the pivot swing number. The next downside objective is 1082.1. The next area of resistance is around 1119.0 and 1126.0, while 1st support hits today at 1097.1 and below there at 1082.1.

COMEX GOLD (AUG) 07/27/2006: Declining momentum studies in the neutral zone will 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. The close over the pivot swing is a somewhat positive setup. The next downside target is now at 610.4. The next area of resistance is around 626.6 and 629.3, while 1st support hits today at 617.2 and below there at 610.4.