The Hindu Business Line : Gold may top $950 on rising crude prices

Perth, May 25 Gold prices gained three per cent last week and ended at $925.80 an ounce for June delivery. The precious metal derived its strength from rising crude oil prices, which hit a record $135.09 a barrel on Thursday, and fears of rising inflation.

Crude oil is likely to rule firm and that would mean inflation concerns will persist, in turn charging up gold’s demand as a safe haven asset. On the other side, an interesting development has been the dropping resale of houses in the US. The decline is seen continuing for at least a year and analysts see all that money coming into the commodities market, particularly gold.

Dollar Vs gold

A surprising aspect of gold’s ascent during the last 10 days has been that the World Gold Council’s report on decline in physical demand has not had any effect. That leaves more potential for gold to rise further. Adding fuel to gold’s rise has been the declining value of the dollar. With the US economy heading for a slowdown, the dollar has come under severe pressure and it is set to fall further.

That, in turn, could fire up crude oil prices and the wheel will be complete with the gain for gold. However, the outlook still looks a bit on the downside for the yellow metal in the long term; but, if it can get past $950 and touch $960, things could turn bullish. Holding promise for a positive run is the fact that long speculators continue to outnumber short ones by 55 to 15.

Though $960 could be crucial for gold, first it will have to overcome a stiff resistance around $950 level. According to Angel Commodities, gold could face resistance at $940 and beyond that at $958. On the down side, it is seen getting support at $912. Silver, which has been toeing gold, also closed higher at $18.19 during the weekend. It is seen facing resistance at $18.45 and then at $18.90, according to the Mumbai-based trading house. Support for it is at $17.14.

New highs

In the domestic futures market, gold, according to Angel Commodities, could face resistance at Rs 13,060 for 10 gm. If it mounts that, then it could face another hurdle at Rs 13,330. Any fall could see the yellow metal gaining support at Rs 12,360 and a slip below that could see another support at Rs 11,990. For silver, supports are at Rs 23,790 and Rs 22,515, while resistances are at Rs 25,870 and Rs 26,665.

Crude oil seems to find one or the other way to rise to new highs every day. The latest trigger is the Chinese quake and according to Angel Commodities, selling crude below $100 a barrel has become a thing of the past. Supplies are not keeping pace with demand and therefore, crude oil prices are seen ruling firm for some more time to come. In the domestic futures, crude could face resistance at Rs 5,900 a barrel and then at Rs 6,116. Supports for it are at Rs 5,390 and Rs 5,340.

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