Cryptocurrency crash will support rally in gold: Bhavik Patel of Tradebulls

We are bullish on gold and expect gold to test Rs 48,800- Rs 49,400 this week

Gold prices started climbing steadily from the low of March 31, which came around $1680, but the momentum came when prices broke the psychological resistance of $1800 which saw short covering. After that, for a week, prices consolidated but are now moving up, breaking its immediate resistance of $1852 in COMEX. May 17’s gains ($29 rally) indicate that gold, at least for now, no longer remains range bound and has broken above its strong resistance level which occurred at approximately $1852, the 200-day moving average.

Now Gold is trading at 4-week high on COMEX. The threat of rising inflation, coupled with economic uncertainty following disappointing US employment and retail numbers is prompting investors to find safe-haven assets again. Gold tends to outperform when economic data is weakening and underperforms when economic prospects improve. Falling of cryptocurrency market also helped gold in giving strong rally. Hedge fund managers have started increasing their speculative long positions and reducing their short positions. We are bullish on gold and expect gold to test Rs 48,800- Rs 49,400 this week. Any dips near Rs 47,900 is ideal level for taking long positions with stoploss of Rs 47,400.

Silver has also broken out following a rally in Gold and has breached $28 first time after Feb. Although gold is at multi-month high, silver is yet to achieve that feat.The reason why we are bullish in silver is because of the rise of inflation in developed and developing countries. Secondly, there is anticipated demand for more silver as a component of the manufacturing of solar panels. Gold/silver ratio failed to settle above the resistance at the 20 EMA at 67.50 and is moving towards the support which comes at 67 level. Silver bulls will come into play once gold/silver ratio moves below 66.50. We expect silver to trade in range of 72,000-75,000 with bullish bias.

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