Commodity strategies: Gold, silver, crude, base metals

By Tapan Patel
HDFC Securities

Commodity prices traded mixed on Monday. Bullion prices were weak while crude oil and base metals were trading higher. Here is a look at how different commodities are behaving in today’s market.

Outlook: Bullion
Bullion prices traded weak on Monday with spot gold prices at COMEX trading nearly 1 per cent down at $1,835 per ounce, while spot silver prices at COMEX were trading steady below $24 per ounce in morning. Bullion witnessed selling pressure on vaccine rollouts and approval of emergency use of vaccine in the US. We expect bullion prices to trade sideways to down in current range in the absence of any key triggers. Bullion prices may witnessed fresh buying if US finalises the COVID-19 package deal.

Trading Strategy: MCX Gold February resistance for the day lies at Rs 49,400 per 10 gram, with support at Rs 48,700 per 10 gram. MCX Silver March support lies at Rs 62,500 per kg, resistance at Rs 65,000 per kg.

Outlook: Crude Oil
Crude oil prices traded higher with benchmark NYMEX WTI crude oil trading over half a percent up near $46.88 per barrel in the morning trade. Crude oil prices traded up on demand growth prospects as vaccine rollouts begin in UK while US started vaccination campaign from this week. The approval of vaccine from UK, Canada and emergency use from US has raised optimism for fuel demand recovery. Crude oil prices were expected to trade sideways to up for the day supported by positive global cues.

Trading Strategy: MCX Crude Oil December support lies at Rs 3,390 per barrel, with resistance at Rs 3,510 per barrel.

Outlook: Base Metals
Base metals traded higher on Monday, paring previous losses in the morning trade as vaccine rollouts at global scale boosted investment sentiments into riskier assets. Base metal prices are in strong bull run over demand growth recovery from China and optimism from vaccine rollouts. Zinc and nickel prices witnessed rally on resumption of Brexit talks, while copper prices resumed its uptrend on Monday. Base metals were expected to trade sideways to up for the day, supported by weaker dollar over risk on sentiments.

Trading Strategy: MCX Copper December support lies at Rs 601 and resistance at Rs 610. MCX Zinc December support lies at Rs 215, resistance at Rs 221. MCX Nickel December support lies at Rs 1,290, with resistance at Rs 1,340.

By Ravindra Rao, Kotak Securities

MCX GOLD Feb has witnessed a strong rebound after retracing 50 per cent of the recent rally (Rs 47,551 to Rs 50,175) at Rs 48,860. However, the price continued to consolidate in the band of Rs 48,800-Rs 49,550 since the last few sessions. The higher band is resisted by 21-day EMA at Rs 49,550 and lower band support is from 50 per cent Fibonacci retracement level, along with the rising window support at Rs 48,800. Meanwhile, the strength index (RSI) is in the zone of 48.8, suggesting sideways trend. Hence, either side break of the range would decide the trend in gold futures.

Strategy: Buy MCX Gold Feb at Rs 48,900. Target Price: Rs 49,500. Stop loss: Rs 48,600.

MCX SILVER March futures is consolidating in the band of Rs 62,700-Rs 64,800.The lower band is supported by the 21-day EMA at Rs 62,840, followed by Rs 62,200 (right shoulder of inverse HNS). As long as it holds, bulls might have the edge to push prices further towards the immediate resistance of Rs 64,800, followed by Rs 65,500. However, the failure to hold Rs 62,200 would negate the pattern. Meanwhile, RSI is at 55, suggesting sideways to higher trend. For the day, the price is expected to move in the band of Rs 62,200-64,800 with sideways to positive bias.

Strategy: Buy MCX Silver March at Rs 62.900. Target Price: Rs 64,500. Stop loss: Rs 62,200.

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