Resistance likely at $1,505/ounce
June gold futures rose to a record on the New York Mercantile Exchange on speculation the sovereign-debt crisis in Europe will worsen, boosting the precious metal’s appeal as an alternative to currencies. Gold reached an all-time high of $1,489.1 an ounce after Moody’s cut Ireland’s credit rating by two levels to the lowest investment grade, thus eroding euro’s value.
The June futures saw short covering above $1,466 by speculators and hence, this level should act as support in the event of profit booking. The futures also closed above the value area (1,474-1,784) with 31 per cent volume, indicating strong undercurrent. The call options traders expect a fresh upside above $1,500 as the covered short positions in the $1,500-strike call options. The support is expected to come in around $1,460, based on open interest build up in $1,460-strike put options.
Technically, prices are expected to face resistance at $1,505 and support at $1,445. If market participants continue to fixate on the inflation story, metals could see further gains. However, there is an opposite view saying commodity prices were rising too much. For instance, Goldman Sachs said for the short-term (three to six months), it was underweighting commodities as most price targets had been hit. For the 12-month view, they remain bullish on commodities.
Views like these could lead to some profit-taking next week, Platt said, especially ahead of a holiday. Comex and NYMEX are closed for Good Friday. For gold, he expects the market to reach its inflation-adjusted high, which is around $2,300, depending on which inflation calculator is used. Platt said, June gold futures could rise to around $1,505-$1,510 next week, where it may run into resistance. Support for gold is seen at $1,445.