The Gold Market, Stocks And ETFs Weekly Report July 27, 2012

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Includes: AG, AGQ, GLD, PHYS, SLW
by: Patrick MontesDeOca

By Patrick MontesDeOca

As the Eurozone crisis rumbles on and politicians continue to seek out a comprehensive and lasting solution, the key question remains. How can countries continue to practice austerity, while simultaneously stimulating the growth required to pay down debt and emerge as self-sustaining robust economies? Numerous possible solutions to this dilemma have been proposed, some of which have focused on how to get the most out of the substantial gold reserves currently held within European Central Banks.

The Eurozone's gold reserves stand at almost 10,000 tonnes and it is well known that some of the countries affected by the crisis, including Portugal and Italy, are responsible for a significant proportion of these assets. These reserves have served those countries well over the years and even more over the last decade, thanks in part to gold's unique wealth preservation characteristics. Nevertheless, the question is rightly being asked as to the role that these gold reserves can and should play to help alleviate the problems now facing the Eurozone and the individual member states within it.

Most agree that outright sales of gold are not the answer. Aside from the obvious problem that the outstanding debt level of the struggling European countries far surpasses the value of their gold reserves. Existing EU laws prohibit such a move. As do the provisions of the Central Bank Gold Agreement, which limits gold sales in order to protect the collective value of Western Europe's reserves. To illustrate this point, the gold holdings of the crisis-hit Eurozone countries (Portugal, Spain, Greece, Ireland and Italy) represent only 3.3% of the combined outstanding debt of their central governments. A one-time sale of all of their gold reserves would not cover even one year's worth of their debt service costs. This would be akin to an individual selling everything they owned in order to make one month's mortgage payment.

If we take a look at the fundamental picture for gold and the world economy, we can begin to see confirmation and anticipation that the fundamentals are in sync with the technical picture. This combination is very powerful and makes a high probability situation, that the path of least resistance is much higher prices for the yellow metal.

The prices for precious metals could be entering the last stages of the completion of one of the strongest technical indicators called a descending falling wedge reversal.

The Falling Wedge is a bullish pattern that begins wide at the top and contracts as prices move lower. This price action forms a cone that slopes down as the reaction highs and reaction lows converge. In contrast to symmetrical triangles, which have no definitive slope and no bias, falling wedges definitely slope down and have a bullish bias. However, this bullish bias cannot be realized until a resistance breakout.

This descending wedge daily resistance level of $1,605 was broken on July 26, 2012. By using this work to forecast the upper end of the target ranges, we can identify the $1,670 to $1,780 as the potential targets near term.

Let's take a look at some metals stocks and ETF's and see how they compared against the yellow metal.

GDX - Market Vectors Gold Miners

The GDX (Market Vectors Gold Miners) ETF closed at $43.13. The 52 week Range is: $39.08 - $66.98

The market closing above the 9 and 18 day MA's on a weekly negates previous bearish trend neutral to bullish.

With the market closing above the VC Weekly Price Momentum Indicator of $42.27, it has negated the bearish sentiment to bullish.

Look to take some profits if long as we reach $44.15 and $45.16 levels early next week.

Buy corrections to $41.26 and $39.38 levels to cover shorts and go long on a reversal stop. If long use the $39.38 levels as a SCO/GTC ( Stop Close Only and Good 'Till Cancelled order ).

PHYS - Sprott Physical Gold Trust ETV

The PHYS - Sprott Physical Gold Trust ETF closed at $14.09. The 52 week Range is: $13.03-$16.86

The market closing above the 9, 18, and 36 day MA's on a weekly basis is bullish.

With the market closing above the VC Weekly Price Momentum Indicator of $13.93, it has negated the bearish sentiment and turned bullish.

Look to take some profits if long as we reach $14.29 and $14.48 levels next week.

Buy corrections to $13.74 and $13.38 levels to cover shorts and go long on a reversal stop. If long use the $13.38 levels as a SCO/GTC ( Stop Close Only and Good 'Till Cancelled ).

GLD -SPDR Gold Trust ETF
The GLD - SPDR Gold Trust ETF closed at $157.54. The 52 week Range is: $148.27-$185.85

The market closing above the 9,18 and 36 day MA's, on a weekly basis is bullish. With the market closing above the VC Weekly Price Momentum Indicator of $155.83, it has negated the bearish sentiment to bullish.

Look to take some profits if long as we reach $159.67 to $161.83 levels next week

Buy corrections to $153.67 and $149.83 levels to cover shorts and go long on a reversal stop. If long use the $149.83 levels as a SCO/GTC ( Stop Close Only and Good 'Till Cancelled order).

AGQ - ProShares Ultra Silver

The AGQ - ProShares Ultra Silver closed at $38.64. The 52 week Range is: $34.45-$127.08

The market closing below the 9 and 18 day MA's, on a weekly basis remains negates previous bearish trend neutral to bullish.

With the market closing above the VC Weekly Price Momentum Indicator of $37.62, it has negated the bearish sentiment to bullish.

Look to take some profits if long as we reach $39.74 to $40.83 levels next week.

Buy corrections to $36.53 and $34.41 levels to cover shorts and go long on a reversal stop. If long use the $34.41 levels as a SCO/GTC ( Stop Close Only and Good 'Till Canceled order).

AG - First Majestic Silver Corp.

The AG - First Majestic Silver Corp. closed at $16.84. The 52 week Range is: $12.12-$25.56

The market closing above the 9, 18 and 36 MA's on a weekly basis is bullish.

With the market closing above the VC Weekly Price Momentum Indicator of $16.24, it has negated the bearish sentiment to bullish.

Look to take some profits if long as we reach the $17.63 to $18.42 level next week

Buy corrections to $15.45 and $14.06 levels to cover shorts and go long on a reversal stop. If long use the $14.06 levels as a SCO/GTC ( Stop Close Only and Good 'Till Cancelled order).

SLW - Silver Wheaton Corp.

The Silver Wheaton Corp closed at 27.48. The 52 week Range is: $22.94 and $42.50

The market closing above the 9, 18, and 36 day MA's on a weekly basis is bullish.

With the market closing above the VC Weekly Price Momentum Indicator of $26.16, it has negated the bearish sentiment to bullish.

Look to take some profits if long as we reach the 27.20 and 27.91 levels next week.

Buy corrections to $26.44 and $25.39 levels to cover shorts and go long on a reversal stop. If long use the $35.26 levels as a SCO/GTC ( Stop Close Only and Good 'Till Canceled order).

PSLV - Sprott Physical Silver Trust

The PSLV Sprott Physical Silver Trust closed at $11.28. The 52 week Range is: $10.87 and $21.83

The market closing above the 9 and 18 day MA's on a weekly has negated previous bearish trend neutral to bullish..

With the market closing above the VC Weekly Price Momentum Indicator of $11.18, it has negated the bearish sentiment to bullish.

Look to take some profits if long as we reach the $11.45 to $11.82 levels next week.

Buy corrections to $11.01 and $10.74 levels to cover shorts and go long on a reversal stop. If long use the $10.74 levels as a SCO/GTC ( Stop Close Only and Good 'Till Canceled order).

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in AG, AGQ, PSLV, SLV, 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.