Commodity strategies: Gold, silver, crude, base metals

By Tapan Patel

Commodity prices traded lower today as most of the commodities in the non-agro segment witnessed selling except gold. Base metals and silver prices traded weak on demand growth worries over spreading virus cases while crude oil futures plunged on higher supply after OPEC agreed to raise output. Gold prices held firm, limiting downside on lower US bond yields.

Here is a look at how different commodities are behaving in today’s market.
Outlook: Bullion
Bullion prices traded firm on Tuesday with spot gold prices at COMEX trading near $ 1,817 per ounce, while spot silver prices at COMEX were trading marginally up at $ 25.18 per ounce. The precious metals pared early losses on Monday, witnessing recovery. The fall in US treasury yields and selling in global equity indices over virus worries boosted buying in precious metals. The US 10 year treasury yields fell to 1.20%, pushing bullion prices up on safe haven buying. We expect bullion prices to trade sideways to up for the day.

Trading Strategy
MCX Gold August resistance for the day lies at Rs 48500 per 10 grams with support at Rs 48,000 per 10 grams. MCX Silver September support lies at Rs 66,200 per KG with resistance at Rs 69,000 per KG.

Outlook: Crude Oil
Crude oil prices traded firm with benchmark NYMEX WTI crude oil prices trading 0.30% up near $ 66.55 per barrel in the morning trade. Crude oil prices witnessed a sell off, falling by more than 7% on Monday, reporting its worst day since March. The selling in crude oil prices triggered gloomy demand outlook and higher supply after OPEC plus nations reached an agreement to boost output from August. We expect crude oil prices to trade sideways to down for the day.

Trading Strategy
MCX Crude Oil August support lies at Rs 4,930 per barrel with resistance at Rs 5,080 per barrel.

Outlook: Base Metals
Base metals prices traded firm on Tuesday with most of the metals paring some of the losses made on Monday. Earlier, base metals traded under pressure on demand growth concerns with rising virus cases across the globe. The spread of the delta virus variant is stoking a risk-off mood as investors consider whether new lockdown restrictions will sap the economic rebound. The stronger dollar and mixed global cues has kept base metals under pressure in lack of fresh triggers. Base metals may trade sideways to up for the day.

Trading Strategy
MCX Copper July support lies at Rs 716 and resistance at Rs 725. MCX Zinc July support lies at Rs 239 with resistance at Rs 247. MCX Nickel July support lies at Rs 1,370 with resistance at Rs 1,430.

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