Gold Rallies, Following The Appreciation Of Euro And British Pound

Gold is rallying Wednesday, following the appreciation of the Euro and the Pound.  The correlation between Gold and the EUR/USD and GBP/USD is becoming clearer by the day.  However, the correlation is odd since these two currency pairs are positively correlated with the S&P futures when Gold is normally negatively correlated with U.S. equities.  As a result, Gold is opting to exhibit a positive correlation with U.S. equities, a strange occurrence we’ve witnessed periodically throughout the economic crisis.

Gold has normally shown a positive correlation with the S&P futures during large legs down in the past, which could be foreboding for U.S. equities.  Technically speaking, the precious metal is trading well above our 1^st tier uptrend line while approaching our 2^nd tier.  Gold managed to avoid retesting $900/oz, so the uptrend is safe for the time being.

However, the near-term downtrend line is approaching, and it will be interesting to see Gold’s reaction once it reaches an inflection point with our 2^nd tier uptrend line.  Fundamentally we see resistances of $928.16/oz, $930.72/oz, $933.86/oz, $936.14/oz, and $939.27/oz.  To the downside, find supports of $924.74/oz, $922.45/oz, $919.32/oz, and $916.98/oz.  Gold is currently trading at $925.85/oz.

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