Commodity strategies: Gold, silver, crude and base metals

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By Tapan Patel

Commodity prices traded mixed on Tuesday continuing the trend from the previous session as the bullion prices continued upside extending the previous week’s rally while crude oil prices traded lower on demand growth concerns. Base metals witnessed mixed trade amid China pollution curbs and policy tightening. Here is a look at how different commodities are behaving in today’s market.

Outlook: Bullion

Bullion prices traded marginally up with spot gold price at COMEX was trading near $1734 per ounce while spot silver price at COMEX was trading near $26.20 per ounce in the morning trade. The precious metals extended gains from Monday despite of stronger dollar and higher bond yields ahead of Fed meeting. The inflation hedge is a key factor supporting gold buying as Fed is committed to keep interest rates low. We expect bullion prices to trade sideways to up for the day.

Trading Strategy:

MCX Gold April resistance for the day lies at Rs. 45200 per 10 grams with support at Rs. 44700 per 10 grams.

MCX Silver May support lies at Rs. 66000 per KG, resistance at Rs. 69000 per KG.

Outlook: Crude Oil

Crude oil prices traded lower with benchmark NYMEX WTI crude oil prices were trading 0.78% down at $64.88 per barrel in the morning trade. Crude oil prices witnessed decline on demand recovery concerns after Germany and France haled vaccinations. Germany, France and Italy plan to suspend AstraZeneca (Covid-19) injections after reports of possible serious side effects. The rising inventories also pressured oil prices to trade weak for the day. Crude oil prices are expected to trade sideways to down for the day.

Trading Strategy:

MCX Crude Oil March support lies at Rs. 4650 per barrel with resistance at Rs. 4780 per barrel.

Outlook: Base Metals

Base metals complex traded weak with most of the metals kept to lower trading range on China demand concerns and stronger dollar. The expectations of China policy tightening and stalled vaccinations in European countries pressured base metals to trade weak. Aluminium prices were near 10 months highs in China over power cuts while actions to curb pollution has also raised supply concerns from China. Copper prices kept range bound trading on mixed global cues. Base metals are expected to trade sideways to down for the day.

Trading Strategy:

MCX Copper March support lies at Rs. 670 and resistance at Rs. 685.

MCX Zinc March support lies at Rs. 216, resistance at Rs. 222.

MCX Nickel March support lies at Rs. 1140 with resistance at Rs. 1190.

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

By Ravindra Rao

MCX Gold April future continued to consolidate in a range after its strong rebound from the key support near Rs 44200. On the daily chart, it has been observed that price held the support of lower band (-2 SD) of the Bollinger Band (BB) and now it is consolidating between the midline and lower band. Meanwhile the flattening condition of the lower Bollinger band has limited its downside. Meanwhile immediate resistance for April futures exists around Rs 45200, followed by Rs 45600 (MidLine of BB) and key support holds around Rs 44200. The strength index RSI (36) has reversed from the oversold zone. Furthermore positive divergence between RSI and price also strengthened the recovery. For the day, price is expected to move in the band of Rs 44200-45200 with sideways to positive bias. Only close above Rs 45200, would extend its gains further towards Rs 45600.

Strategy:

Buy MCX Gold April at Rs 44700 with a target of Rs 45200 and a stop loss at Rs 44400.

MCX Silver May future is also oscillating between the lower and mid band of the Bollinger band (BB) suggesting sideways trend. Immediate support for price holds around Rs 65800 (78.6% Fibonacci retracement level) followed by Rs 65450 (Lower BB). Likewise key resistance for May future exists around Rs 68200 (Top of the Doji Candle), which also coincides with the midline of the Bollinger band at Rs 68050. On the momentum front, RSI is trading around 50(49) suggesting sideways bias. For the day, price is expected to move in the range of Rs 65800-68200 with sideways bias. Only a sustained move out of the range could bring more clarity to the direction in Silver prices.

Strategy:

Buy MCX Silver May at Rs 66400 with a target of Rs 68200 and a stop loss at Rs 65400.

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

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