Commodity strategies: Gold, silver, crude, base metals

Commodity strategies: Gold, silver, crude, base metals


By Tapan Patel

Commodity prices traded mixed on Friday, after a steady trading in the previous session. On Thursday, bullion prices continued upside move as an inflation hedge while base metals traded firm, supported by weaker dollar and US stimulus. Crude oil prices traded mixed on rising supplies, weighing 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 $1752 per ounce while spot silver price at COMEX was trading flat near $25.35 per ounce in the morning trade, keeping the upper trading range. The precious metals rose on weaker dollar and a drop in US bond yields due to inflation concerns over higher government spending. The US 10 year treasury yields fell to 1.63 per cent while the dollar index dropped to 92 mark boosting gold to its six week high. We expect bullion prices to trade sideways to up for the day.

Trading Strategy:

MCX Gold June resistance for the day lies at Rs. 47000 per 10 grams with support at Rs. 46500 per 10 grams. MCX Silver May support lies at Rs. 65800 per KG, resistance at Rs. 68500 per KG.

Outlook: Crude Oil

Crude oil prices traded marginally up with benchmark NYMEX WTI crude oil prices were trading near $59.69 per barrel in the morning trade. Crude oil prices got some support from dollar decline and fall in inventories as traders and investors bet on higher demand expectation in second half of the year. Crude oil prices traded up on Fed comments to do the necessary to support economic recovery. We expect crude oil prices to trade sideways to up for the day.

Trading Strategy:

MCX Crude Oil April support lies at Rs. 4390 per barrel with resistance at Rs. 4510 per barrel.

Outlook: Base Metals

Base metals complex traded marginally down with most of the metals traded weak on China inflation concerns. China’s factory gate prices rose at their fastest annual pace since July 2018 in March, as growth in the world’s second-largest economy continued to gather momentum. China’s producer price index (PPI) rose 4.4 per cent in annual terms. The higher inflation may lead to policy tightening from banks which may pressure base metals. Base metals are expected to trade sideways to down for the day despite of weaker dollar.

Trading Strategy:

MCX Copper April support lies at Rs. 687 and resistance at Rs. 698.

MCX Zinc April support lies at Rs. 225, resistance at Rs. 231.

MCX Nickel April support lies at Rs. 1240 with resistance at Rs. 1290.

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

By Ravindra Rao

MCX Gold June futures continued to extend its gains and met the double bottom target at Rs 46645. The Bollinger band study on the daily charts has supported the uptrend in price rally, as it breached the higher Bollinger band (+2SD). The expanding condition in the bands also strengthened the rise in prices. Now the next key resistance is at Rs 47090 (38.2 per cent Fibonacci level of the recent down trend), followed by Rs 47500 and support holds around Rs 46260. The strength index (RSI) is now hovering near 67, suggesting firmness in trend. Hence for the day, price is expected to move in the band of Rs 46260-47090 with sideways to positive bias and close above Rs 47090 would push it further towards Rs 47500.

Strategy:

Buy MCX Gold June at Rs 46500 with a target of Rs 47090 and a stop loss at Rs 46200.

MCX Silver May futures have breached the higher band of the downward sloping channel near Rs 67200 and closed above the midline of the Bollinger band suggesting firmness in the trend. Now the next resistance exists around Rs 68600 (higher Bollinger band), which could be the ideal target for the day. On the downside, immediate support holds around Rs 66800 and Rs 65950. On the momentum front, RSI has moved above 50(57) strengthening the bull case. So for the day, price is expected to move in the band of Rs 65950-68600 with a sideways to higher trend.

Strategy:

Buy MCX Silver May at Rs 66900 with a target of Rs 68400 and a stop loss at Rs 65900.

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



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