Commodity strategies: Gold, silver, crude, base metals

By Tapan Patel

Commodity prices traded higher on Tuesday continuing the buying trend from the previous session. Bullion prices made strong comeback after previous week’s decline while base metals prices continued upside with China demand. The dollar index ended down by 0.39 per cent for the day. Here is a look at how different commodities are behaving in today’s market.

Outlook: Bullion
Bullion prices traded higher with spot gold price at COMEX was trading near $ 1,812 per ounce while spot silver price at COMEX was trading up at $ 28.12 per ounce in the morning trade. Bullion prices witnessed recovery on weaker dollar and pandemic worries. Traders and investors are focusing on US stimulus hopes and Fed chairman Jerome Powell’s testimony later tonight. We expect bullion prices to trade sideways to up for the day.

Trading strategy:
MCX Gold April resistance for the day lies at Rs. 47,200 per 10 grams with support at Rs. 46,500 per 10 grams.
MCX Silver March support lies at Rs. 68,500 per KG, resistance at Rs. 72,000 per KG.

Outlook: Crude Oil
Crude oil traded higher with benchmark NYMEX WTI crude oil prices were trading 1.50 per cent up at $ 62.60 per barrel in the morning trade. Crude oil prices rose to 13 month high on expectations of slower restart of oil output form cold weather impacted Texas area. The resume of refinery operations will bring oil demand back on track. Crude oil prices are expected to trade sideways to up for the day.

Trading strategy:
MCX Crude Oil March support lies at Rs. 4,490 per barrel with resistance at Rs. 4,650 per barrel.

Outlook: Base Metals
Base metals complex continued to soar with Copper and Nickel prices traded with more than 1 per cent gains. Copper prices traded to the highest levels since 2011 at LME while Nickel prices rallied to the most since 2014 as China resumes trading on Monday. The US stimulus hopes, demand from China and weaker dollar combined has boosted base metals to trade higher. The premium for cash copper over three-month metal is rising showing tight supply in spot market. We expect base metals to trade higher for the day.

Trading strategy:
MCX Copper March support lies at Rs. 702 and resistance at Rs.712.
MCX Zinc March support lies at Rs. 230, resistance at Rs. 236.
MCX Nickel February support lies at Rs. 1,390 with resistance at Rs. 1,460.

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

By Ravindra Rao

MCX Gold April future witnessed good recovery as price breached the initial resistance of Rs 46,640 (5 Day EMA). Meanwhile, price is still hovering in the downward sloping channel with immediate resistance near Rs 47,280, followed by Rs 7,560 (21 Day EMA). On the other hand, key support holds around Rs 46,640, followed by Rs 46,200. On the momentum front, RSI has reversed from the oversold zone and now it is moving towards the mid zone of 50(42) indicating rebound in the price. Going by the above analysis, price is expected to move in the band of Rs 46,640-47,280 with sideways to positive bias. A close above Rs 47,280, would push price higher towards the Rs 47,560-47,600 zone.

Strategy:
Buy MCX Gold April at Rs 46,750 with a target of Rs 47,280 and a stop loss at Rs 46,400.

MCX Silver March future has extended its rebound as price breached the initial resistance of Rs 69,680 (5 Day EMA). Meanwhile, price is trading above the bullish crossover of 5 and 21 day EMA which has strengthened the recovery in Silver prices. On the upside Rs 70,760 holds key resistance, price needs to sustain above to extend its rally towards the next resistance of Rs 71,800, followed by Rs 72,700. Meanwhile, RSI is hovering near 58 suggesting a sideways to bullish trend. However it needs to sustain above 50 to further strengthen the momentum in the rally. Hence for the day, price is expected to move towards Rs 71,800, followed by Rs 72,700. However only close below Rs 68,800 would change the trend to neutral.

Strategy:
Buy MCX Silver March at Rs 70,200 with a target of Rs 71,800 and a stop loss at Rs 68,800.

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