Commodity strategies: gold, silver, crude, base metals



By Tapan Patel


Commodity prices traded on a mixed note. While most of the non-farm segment’s commodities rose, bullion saw sales. Crude oil prices rallied on bullish weekly inventory data, while base metals extended their gains against the higher demand prospectus on the global economic recovery.

Here is an overview of the behavior of commodities in the current market:

Outlook: ingots
Bullion traded steadily with COMEX spot gold at around $ 1,780 an ounce and spot silver at around $ 26.50 an ounce in morning trades. Prices remained stable in a range, offsetting their earlier losses amid mixed global signals. The gains in US Yreasury yields over Treasury Secretary Jennet Yellen’s remarks on rate hikes put pressure on precious metals. However, the position of the US central bank is clear to keep monetary policy ultra-easy. Bullion prices are expected to trade sideways to rise for the day on mixed global signals.

Trading strategy
For

Gold futures contracts (June), resistance is at Rs 47,300 for 10 grams and support at Rs 46,700 for 10 grams. For MCX silver (May), support is at Rs 67,500 and resistance at Rs 71,500 per kilogram.

Outlook: crude oil
Oil prices traded higher, with benchmark NYMEX WTI crude prices rising more than 2 percent to $ 66.24 a barrel in morning trades. Crude oil traded higher on expectations of higher demand as the US and European economies reopened. Crude oil prices were boosted by a large weekly inventory draw suggested by the American Petroleum Institute. Official weekly inventory data will be released tonight. The large-scale vaccination campaign in the United States and expectations of easing lockdown restrictions in the UK have improved the outlook for oil demand. Crude oil is expected to trade for the day.

Trading strategy
MCX crude oil (May) finds support at Rs 4,830 per barrel and resistance at Rs 4,980 per barrel.

Outlook: base metals
Most base metal prices extended their gains on Wednesday amid expectations of strong demand on the global economic recovery. The easing of foreclosure measures in Europe and the strengthening of US infrastructure due to the stimulus package have boosted purchases of industrial metals, especially copper. Improved manufacturing activities and the push for green infrastructure have pushed LME copper prices above $ 10,000 per tonne. Base metals are expected to trade higher for the day.

Trading strategy
For MCX copper (May), support is at Rs 763 and resistance at Rs 772. For MCX zinc (May), support is at Rs 234 and resistance at Rs 240. For nickel MCX (May) ), support is at Rs 1.310 and resistance at Rs 1.360.

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


By Ravindra Rao


MCX gold futures remained higher for most of Tuesday’s session, but saw corrective movement later. The price recorded a double top near Rs 47,450 which has now become a strong resistance. The eight-day moving average is still above the 20-day moving average, which may provide some support. However, the price closed below the two moving averages which could keep the downward pressure on. Price needs to break above the eight day moving average resistance near Rs 47,120 for the bulls to maintain their strength. Until then, the price could move sideways for the day. Support is seen at Rs 46,700 and strong support near Rs 46,500. Resistance is set at Rs 47.120, followed by Rs 47.450.

Trading range for the day: Rs 46,600-47,100

MCX silver also traded in a positive zone during the majority of Tuesday’s session, recording a new recent high near Rs 71,400. However, later in the day the white metal saw a sharp drop below. the support of Rs 69,500. The price is between the eight and 20 day moving averages with the eight day moving average being higher than the 20 day one. This could support the bulls until the 20 day moving average support near Rs 68,900 holds. Immediate support is placed at Rs 68,900 and strong support at Rs 68,000. MCX silver has resistance near Rs 70,100, followed by Rs 70,800. The RSI momentum indicator is above 50, which corroborates the bull case. Silver could trade sideways to positive as long as Rs 68,000 holds.

Strategy

Buy MCX money (July) at Rs 68,900 for a target of Rs 70,400 with stop loss at Rs 68,000

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



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