Gold And Silver Weekly Futures Report, August 3, 2012: Winter Storm Of Volatility Is Coming

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

And for U.S. markets this year, "winter" could mean a storm of volatility in the form of November elections, a government debt ceiling hit soon after, and the so-called "fiscal cliff" in 2013, as the Bush-era tax cuts come due to expire and several billions of dollars in mandatory budget cuts kick in.

As investors mark the Aug. 5 anniversary of the United States losing its triple-A rating from Standard & Poor's, they do so in a market that looks deep in summer slumber - a big change from a year-ago.

August and September 2011, market volatility spiked to levels reminiscent of the height of the U.S. financial crisis. By early October, the S&P 500 was flirting with a bear market. The debt downgrade, which came with the warning that more could be in store, followed weeks of watching congressional leaders play chicken with raising the country's debt ceiling and a feud over a deficit-cutting plan that few deemed deep enough.

The gold and silver markets started the week with high expectations of Mr. Bernanke to announce some kind of specific measure to be taking by the Federal Reserve with regards to QE3 or any form of economic stimuli for the US economy.

Without any specific formula or commitment to follow through from the Federal Reserve to implement any new and immediate measure, the yellow metal ended the week at $1,603 down $9 per ounce and silver at 27.82 +31.2 cents per ounce.

As we move into the third quarter of 2012, the world central planners continue to kick the can down the road with regards to any worldwide resolution or concerted effort to stop the world economy from falling to a deeper and more painful and dangerous deflationary spiral. The precious metals like gold and silver are beginning to confirm some very bullish technical patterns.

This descending falling wedge reversal daily resistance level of $1,605 was broken on July 26, 2012. By using this work to forecast the upper end of the target range we can identify the $1,780 to $1,800 levels as the potential targets near term.

Let's take a look at the daily gold and silver chart technical indicators below and see what we can look forward to next week.

The August (Comex) gold contract closed at 1,609. The 52 week range is: 1,529.30 - 1,921.50.

The market closing above the daily 9, 18 and 36 day MA's on a weekly basis, negates the previous short - term bearish momentum neutral to bullish.

With the market closing above the weekly VC Weekly Price Momentum Indicator of $1,609, it has changed the weekly bearish trend to bullish.

Look to take some profits if long as we reach the 1.632 and 1.654 levels early next week. If stops are taken out at these levels, we could see a rally up to the $1,700 weekly resistance levels.

Buy corrections at the $1,587 and $1,564 area to cover shorts and go long on a weekly reversal stop. If long use the $1,564 level as a SCO/GTC (Stop Close Only and Good Till Cancelled order).

The December (Comex) silver futures contract closed at 27.882. The 52 week range is: 26.20 - 44.19.

The market closing above the daily 9, 18 and 36 day MAs on a weekly basis, negates the previous short - term bearish momentum to bullish.

With the market closing above the VC Weekly Price Momentum Indicator of 27.73, it has changed the weekly bearish trend to bullish.

Look to take some profits if long as we reach the 28.50 and 29.17 levels early next week. If stops are taken out at these levels, we could see a rally up to the 30 per ounce weekly resistance levels.

Buy corrections at the 27.06 and 26.29 area to cover shorts and go long on a reversal stop. If long use the 26.29 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 AG, AGQ, SLV, PSLV, PHYS, GLD, GDX, 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.