Compiled 07/23/08 6:00 AM (CT)

Statistics: London Gold Fix $934.75 -$38.25 LME Copper stocks 129,450 tons +125 tons

GOLD MARKET FUNDAMENTALS: (6:00 AM CST) Normally the gold market would have seen some support off news of mining strikes in South Africa but apparently the market instead is fixated on removing additional flight to quality premium from gold prices. In fact, the South African strikes might be expected to expand into a nationwide incident in the first week of August, but for the time being the slide in oil prices and the reduction of macro economic anxiety in the US economy is apparently the focal point of the gold trade. Just to add to the burden on the gold bulls, the market has also embraced talk that more US Fed members are in favor of hiking interest rates and higher interest rates tend to support the Dollar and dampen inflationary expectations. If the macro economic news wasn't negative enough, the trade also saw partially bearish dialogue toward gold in the Indian gold market action overnight. For the near term, the gold trade will likely track closely with oil prices, with the market also maintaining an inverse track with the US Dollar and US equity markets.

OUTSIDE MARKET DEVELOPMENTS: (6:00 AM CST) Despite seemingly concerning earnings and write offs from several US financial sector companies in the prior trading session the market continues to see a reduction in safe haven and flight to quality concerns. In fact, the sharp and ongoing slide in oil prices seems to have taken over the focus of a number of commodity markets and that in turn has prompted a rather impressive run up in global equity prices. With equity prices firm, the argument for flight to quality instruments like gold and silver is certainly undermined. Furthermore, the US Dollar was persistently deflated due to ideas that ultra high oil prices were set to damage the US economy more than other economies and therefore the reversal in energy prices is now giving direct support to the US Dollar. With the market also picking up on the prospect of rising US interest rates, the precious metals markets see yet another negative from the macro economic condition. With the US weekly oil inventory data scheduled for release this morning and the energy trade generally expecting another bearish report, it is possible that oil prices will keep the pressure up on the metals. With the market also attempting to fan talk of a developing hawkish tone inside the US Fed, it would also seem like support for the Dollar is capable of extending.

Technical Analysis:
Note: Compiled during previous session 07/22/2008 at 3:20 PM CT CBOT GOLD (AUG) 07/23/2008: Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. The intermediate trend has turned down with the cross over back below the 18-day moving average. The outside day down and close below the previous day's low is a negative signal. The defensive setup, with the close under the 2nd swing support, could cause some early weakness.

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