Commodity strategies: Gold, silver, crude, base metals

Commodity strategies: Gold, silver, crude, base metals

By Tapan Patel

Commodity prices traded on an upbeat note on Tuesday, after trading mixed in the previous session. On Monday, commodities in the non-agro segment kept to firm trading range supported by a weaker dollar. Bullion prices witnessed some selling with rise in US bond yields while base metals and crude oil traded up on positive demand outlook. Here is a look at how different commodities are behaving in today’s market.

Outlook: Bullion

Bullion prices traded steady with spot gold price at COMEX was trading near $1772 per ounce while spot silver price at COMEX was trading half a percent up at $25.96 per ounce in the morning trade. Bullion prices traded under pressure after US bond yields recovered from the recent lows.

The yellow metal witnessed selling with a rise in US bond yields while prices were $10 away from touching $1800 levels. The benchmark US treasury yields rose to 1.6150 per cent on Monday after hitting the lows at 1.55 per cent. However, precious metals prices are capped downside over rising worries dues to sudden rise in virus cases across globe. Traders and investors may remain cautious ahead of US bond auction due on Wednesday. We expect bullion prices to trade sideways to down for the day.

Trading Strategy:

Gold June resistance for the day lies at Rs. 46900 per 10 grams with support at Rs. 47700 per 10 grams.
MCX Silver May support lies at Rs. 67500 per KG, resistance at Rs. 69800 per KG.

Outlook: Crude Oil

Crude oil prices traded higher with benchmark NYMEX WTI crude oil prices rose by 1 per cent to $64.07 per barrel in the morning trade. Crude oil prices traded up on dollar decline and expectations of drawdown in weekly inventories. Libya’s National Oil Corp (NOC) declared force majeure on Monday on exports from the port of Hariga. The disruption could cut Libya’s oil output by 280,000 barrels per day. We expect crude oil prices to trade sideways to up for the day.

Trading Strategy:

MCX Crude Oil May support lies at Rs. 4730 per barrel with resistance at Rs. 4870 per barrel.

Outlook: Base Metals

Base metals complex traded higher as most of the metals extended gains on higher demand optimism. Base metals are trading higher with fall in dollar index and positive demand outlook from industries. Copper prices rose to seven week high as low-carbon energy sources will boost demand for the metal used in power grids and electric vehicles. The lower supply concerns due to carbon emission curbs from China has spurred buying in Aluminium and Zinc. Base metals are expected to trade sideways to up for the day.

Trading Strategy:

MCX Copper April support lies at Rs. 720 and resistance at Rs. 735.
MCX Zinc April support lies at Rs. 229, resistance at Rs. 234.
MCX Nickel April support lies at Rs. 1190 with resistance at Rs. 1260.

(Tapan Patel is Senior Analyst (Commodities) at HDFC Securities)

By Ravindra Rao

The rally in MCX Gold June futures took a pause yesterday after it tested the highs near Rs 47850. A star formation at the end of the session is indicating some exhaustion. However the complex inverse head and shoulder is still intact till the support of Rs 46300 holds on closing from the short term perspective. As the neckline support is near Rs 47080, there is chance of price moving to the support before kicking higher again.

A negative divergence in the RSI is indicating a possibility of a corrective move which might attract buying. To conclude any dips towards Rs 47000-46900 would attract buying for an initial target of Rs 47650. Immediate support would be Rs 46600 below which the bulls edge might slightly fade.

Buy MCX Gold June at Rs 46900 with a target of Rs 47650 and a stop loss at Rs 46600.

MCX Silver May futures also corrected following the yellow metal gold. The neckline resistance turned support of the inverse HNS near Rs 67800 would act as a good support/demand zone. Strong short term support is near Rs 66000 below which the bullish momentum may fade.

Resistance is pegged near Rs 69200 and above that Rs 69500 would act as the hurdle. A negative divergence is RSI is indicating some profit booking which might attract buying. Going by the above analysis, the demand zone is near Rs 67700-67500 and the upside might initially extend till Rs 69200.

Buy MCX Silver May at Rs 67900 with a target of Rs 69200 and a stop loss at Rs 67400

(Ravindra Rao, CMT, EPAT is VP-Head Commodity Research at Kotak Securities)

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