Commodity strategies: Gold, silver, crude, base metals

By Tapan Patel

Commodity prices traded on a mixed note on Tuesday, continuing the trend from the previous session. On Monday, bullion prices traded weak while crude oil prices traded higher on Middle East tensions. Base metals retreated on China policy tightening over inflation concerns. The dollar index traded muted while US bond yields were marginally up for the day. 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 $ 1730 per ounce while spot silver price at COMEX was trading flat near $ 24.84 per ounce in the morning trade, keeping to upper trading range. The precious metals kept to choppy trading range with dollar fluctuations and marginal gains in US bond yields. Investors and traders bought safe haven assets on dollar debasement over inflation concerns. We expect bullion prices to trade sideways to up for the day.

Trading Strategy:

Gold June resistance for the day lies at Rs. 46800 per 10 grams with support at Rs. 46200 per 10 grams.
MCX Silver May support lies at Rs. 65200 per KG, resistance at Rs. 67800 per KG. Outlook: Crude Oil
Crude oil prices traded higher as benchmark NYMEX WTI crude oil prices were trading near $ 60 per barrel in the morning trade. Crude oil prices traded firm on tensions in the Middle East after the Yemen-based Houthi movement said it fired missiles on Saudi oil sites. Crude oil prices also supported by expectation of bullish weekly inventory report from API later in the day. We expect crude oil prices to trade sideways to up for the day.

Trading Strategy:
MCX Crude Oil April support lies at Rs. 4450 per barrel with resistance at Rs. 4570 per barrel.

Outlook: Base Metals
Base metals complex traded mixed as most of the metals traded weak on China inflation concerns. The expectations of tightened control over raw materials and higher inflation has capped base metals rally. Copper prices traded under pressure on rising inventory levels in LME and at Shanghai. Inventories monitored by the London Metal Exchange have more than doubled since late February. Stocks on the Shanghai Futures Exchange rose for nine straight weeks through early April in the longest run since 2014. Base metals are expected to trade sideways to down for the day despite of a weaker dollar.

Trading Strategy:
MCX Copper April support lies at Rs. 682 and resistance at Rs. 692.
MCX Zinc April support lies at Rs. 219, resistance at Rs. 225.
MCX Nickel April support lies at Rs. 1190 with resistance at Rs. 1240.

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

By Ravindra Rao

MCX Gold June futures moved in the range of Rs 46250-46900. Earlier the derivative contract has formed a bearish harami/Inside candlestick pattern, whose low is going to play a key support for the day. A move below Rs 46250 could bring a corrective move in price towards Rs 45700. On the other hand, a move above Rs 46900 (high of the range) would push price higher towards the next key resistance of Rs 47500. The strength index (RSI) is now hovering near 61, suggesting firmness in trend. For the day, price is expected to move in the band of Rs 46250-46900 with a sideways bias and close of either side of the range would bring further clarity in the trend.

Buy MCX Gold June at Rs 46400 with a target of Rs 46800 and a stop loss at Rs 46200.

MCX Silver May futures failed to hold its gains and breached the key support of Rs 66370. This could bring a pause in the bullish rally and push price towards the next support around Rs 65200. The breakdown of the rising channel also supported the correction phase in silver prices. Now, key resistance for May future exists around Rs 67300, followed by Rs 67740. On the momentum front, RSI is hovering around the mid zone 50(49) suggesting sideways trend. For the day, price is expected to move in the band of Rs 65200-67740 with a sideways bias. Only a close on either side of the range would bring more clarity in price trend.

Trading range
MCX Silver May to trade in the range of Rs 65200-67740.

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