Hello. This is Ashraf Laidi of Intermarket Strategy and welcome to this new edition of CantosCharts.

We are going to be looking today at gold against the dollar and we're going to be also looking at gold against the CRB, the Commodity Research Bureau which is a big commodity index and which is actually now renamed the Jefferies the Commodity Index.

We're going to look at gold here and what is important is that it's important to actually remember what we said in the previous day's edition, the CantosChart edition when I spoke about the EUR/USD pair and why is it important to look at the trend lines and why those relative strength indices may not be so successfully indicative of the turnaround here.

This is a weekly chart. But before I go into the RSI I just want to show that what is very important here is that basically what I've drawn here this is a red trend line and it starts from the 2008 low here and this is a green trend line which starts just from early this year January low. This is the 55 day moving average. This is the 100 week moving average because basically this is a weekly chart. This is the 55 weekly moving average, this is the 100 week and this is the 200 week moving average.

What is important here is that we're not going to talk so much about the moving averages because they are so well below that, so well below the price. But if you look at this trend line support which really starts from around late spring 2008 and if you connect the trend line with the major lows you will see that we never really fell below it.

This was a very important level here because this level which was the $1,316. Ladies and gentlemen, why is it important? The $1,316 coincided with the trend line support, but it also coincided with if you turned the chart into a daily chart it would have coincided with the 55 day moving average and we never broke below it. That support of confluence, we went below $1,320, $1,318 but we never went below $1,300 which is where the 55 day moving average.

Now I'm looking at the week moving average. So not only the support, the trend line support held up, but also the moving average, the day moving average held up. But for you guys who may not be so comfortable or in the habit of using these moving averages, this is one of the things of the top down approach you have to start.

When you start from the top, when you start from the basic, you have to draw your trend line. You go from the weekly and the daily and then you can go and knock yourself out with the four hour and 15 minutes and so on and we continued to respect this. So, we continued to respect this one in 2008 and this is basically from the February low. This is the February low which coincided when the euro went towards 128.70.

So we were here and we respected this and we came back down a few weeks ago and we respected it and went back up. Does this mean that we're going towards $1,550 or $1,590, or are we going to 1,600?

Frankly, there is nothing that is going to stop this from going there. I could go on and talk about the fundamental backdrop and say that as long as the Federal Reserve is going to continue with QEII until June and it's not going to snap totally out of QEII, meaning that when June comes they're not going to start to sell all of the bonds that they bought. No. They're going to just reinvest the proceeds. That's what they're going to do. But this programme is not about the fundamentals, but it's important to speak about these things.

So as long as this happens, what you need to know is that really 1,400, actually right now is $1,440, $1,450 is going to become the new support level for this weekly chart and the reason that I did not go deeply or in the daily chart - and this is what's important, please be careful here - the reason that I'm not going so precisely into 'oh is it $1,420 or $1,430' because sometimes people have the tendency to focus on one number and when they see the figure has been tested they say this is it, this is the beginning of a selloff. No. You need something you can see with the naked eye, alright? This is a gold chart. There are hundreds and hundreds, billions of money that is chasing this from the big players from the mutual funds, from the gold funds, from the 401K plans and I'm not even talking about the ETFs, that you would only see a big signal if it stands out at you alright. If you're going to look into the 15 hour chart and try to say whether this is the beginning of a new downtrend, that's not the way it works.

So basically, and here with the RSI which I was talking about the euro, look at this. Look at this fall signal. This is a weekly RSI. You had a big breakout. Does this mean that this was overbought and it came down? Yes. It came down probably two weeks after because the RSI does have a tendency here if you use the 14, it has the tendency to be late for the weekly chart not because it's a bad indicator, but just because of the lag. But we came back down here but not enough to break this trend line. The same thing here, nowhere near enough to break the trend line and here we're nowhere near overbought as we are here. Do you get the message ladies and gentlemen?

Now let's look at gold relative to the CRB. So people are saying gold is overbought, it's a bubble and they like to use a bubble. They say this thing is a bubble. Anything that goes up for five, six consecutive weeks they say it's a bubble. Forget that. We are talking about countries that are printing money, okay. The only way for them to sustain their economy is to print money and that's why gold is going to have to go up and whether S&P is going to have to downgrade tomorrow or next year or in two years' time like they said, that is not a bad thing for gold, ladies and gentlemen. So let's get real here.

So let's look at this. This is gold divided by the CRB, the Commodity Research Bureau, which I believe it is in 19 commodity index. It's got oil, gas, natural gas, copper, wheat, agricultural softs, financial, everything and it's in here. This is gold divided by that, alright.

So as this number goes down that means gold is underperforming the rest of the basket which actually includes gold. But here is what is interesting. From the 2008 low, the trend line support, you connect this low, this low, you go all the way straight, we never went below it. That's not very important because we never went below it. But from this low right here, whether you choose from this low or this low from really early '09, February '09, we respected this and we never went below it.

This was a double top. You reach a high, came down, went the same high and then came back down towards the same level. Almost towards the same level. Yes, this is a trend line. Yes, this is a downward trend line. This is a weekly chart. This is a downward trend line. So basically, gold, even though gold is making all the headlines, it was basically underperforming the rest of the commodities because, yes, oil was doing very well. As you know, oil has been outperforming gold and silver has been outperforming gold and copper has been outperforming gold, so it makes sense that gold is falling relative to these things. But why should you bother about this? You should bother about this because it tells you if you think that gold is overpriced or overvalued or in a bubble, actually, no it is not relative to the other commodities.

Yes, against the dollar everything shows to be in a bubble, but you don't measure something against the weak to know how strong it is. You measure it against the other strong things and that's why it has respected. So even though we were in a downtrend, it has respected the downtrend and it looks like it could push higher again and you can say if gold looks good relative to the CRB and it could test higher until it reaches this wedge, it also means that it has more upside against the US dollar and the rest of the currencies.

Ladies and gentlemen, we hope you've enjoyed this edition of CantosCharts. This is Ashraf Laidi of Intermarket Strategy. You can follow me at ashraflaidi.com, or you can also on Twitter at alaidi. Thank you.