Gold And Silver Futures Weekly Report: July 23, 2012

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 |  Includes: GLD, IAU, PHYS, SLV
by: Patrick MontesDeOca

The August gold futures contract had a weekly close of $1,583 per ounce, down about $10 dollars per ounce for the week. In view of all the anticipation earlier last week, the FOMC meeting passed by without a clear and transparent US economic plan and the market took it in stride.

This is for the ninth time that the paper shorts have failed to break gold and silver prices to new lows since the May 16, 2012, low of $1,529.30 per ounce. With the market closing above the $1,600 levels on a weekly basis, it would confirm a bullish descending wedge breakout creating more pressure on the shorts. Buy stops triggered at these levels could propel prices into the $1,625 to the $1,650 levels of monthly resistance.

The eurozone and its effects on the global economic situation seems to indicate the downward deflationary spiral continues to accelerate as the central leaders and planners seem to have lost all sense of urgency and plan of action to what is developing to be a worldwide contagion that could bring the global economy to its knees.

The world economy is the worst since 2009. Consequently, six out of seven economies using the euro are in a recession. The US is struggling and economic powers like China, India or Brazil are in no position to help. A eurozone slowdown also creates a domino effect. As one economy weakens other economies do as well. The eurozone slowdown hurts factories in China and so China buys less from other countries like Brazil. As a result, the IMF has reduced its forecast for world growth this year to 3.5% - the slowest rate since 2009.

It was a quiet week - maybe the calm before the storm as the gold market fundamentals keep getting stronger by the minute in what appears to be major central bank and sovereign buying around the mid-1,550 levels for cash gold and just under 27 for cash silver. It also appears that retail and Institutional buying have stepped up their bids at these levels.

The technical picture continues to get stronger as the market has closed above the $1,881 (9MA) level and the $1,585 (36MA) level on the daily charts. A weekly close above the $1,593 (9MA) is bullish and sets the weekly uptrend well in place.

Let's take a look at the gold and silver weekly charts below and see what we can look forward to in the next week.

The August (Comex) gold contract closed at 1,5823. The 52-week Range is: 1,529.30-1,921.50. The market closing above the daily 9 day MAs on a weekly basis, negates the previous short term bearish reversal to neutral.

With the market closing above the VC Weekly Price Momentum Indicator of 1,582.90, it has set the weekly trend from bearish to bullish. Look to take some profits if long as we reach the 1,599 to 1,615 levels early in the next week. If stops are taken out here, we could see a rally up to the 1,640 weekly resistance levels.

Buy corrections at the 1,567 and 1,551 level to cover shorts and go long on a reversal stop. If long, use the 1,551 level as a SCO/GTC (Stop Close Only and Good Till Cancelled order ).

The December (Comex) silver futures contract closed at 27.38. The 52-week Range is: 26.20-44.19. The market closing above the daily 9, day MAs on a weekly basis, negates the previous short - term bearish reversal to neutral.

With the market closing above the VC Weekly Price Momentum Indicator of 27.23, it has set the weekly trend from bearish to bullish. Look to take some profits if long as we reach the 27.75 and 28.11 levels early in the next week. If stops are taken out here, we could see a rally up to the 28.34 weekly resistance levels.

Buy corrections at the 26.87 and 26.35 levels to cover shorts and go long on a reversal stop. If long, use the 26.35 levels as a SCO/GTC (Stop Close Only and Good Till Cancelled order).

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in PSLV, PHYS, AG, AGQ, GDX, GLD, SLW over the next 72 hours.

Additional disclosure: Precious metals products trading involves significant risk of loss and is not suitable for everyone. Past performance is not necessarily indicative of future results.