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Commodity strategies: Gold, silver, crude and base metals


By Tapan Patel


Commodity prices traded mixed on Wednesday, continuing the trend from the previous session as bullion prices witnessed recovery while crude oil prices continued downside despite of rally in equity indices and base metals complex traded weak on China demand worries on Tuesday. 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 $1712 per ounce while spot silver price at COMEX was trading near $25.78 per ounce in the morning trade. Bullion prices witnessed recovery with gold price recovering from nine month lows as US bond yields eased from 1 year highs while dollar index traded off the three and a half month highs. The rally in equity indices and firm dollar may limit the upside in precious metals for the day. We expect bullion prices to trade sideways to up for the day.

Trading Strategy:

MCX Gold April resistance for the day lies at Rs. 45100 per 10 grams with support at Rs. 44500 per 10 grams.

MCX Silver May support lies at Rs. 65000 per KG, resistance at Rs. 68500 per KG.

Outlook: Crude Oil

Crude oil prices traded lower with benchmark NYMEX WTI crude oil prices were trading 0.70% down at $63.56 per barrel in the morning trade. Crude oil prices witnessed selling on expectations of rise in weekly inventories after US API report showed inventory build of 12.79 mb. The traders also weighed on the damages of the attack on Saudi oil facilities as the operations were less affected. Crude oil prices are expected to trade sideways to down for the day.

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Trading Strategy:

MCX Crude Oil March support lies at Rs. 4580 per barrel with resistance at Rs. 4720 per barrel.

Outlook: Base Metals

Base metals complex traded mixed on Wednesday with Copper prices traded firm on supply crunch fears, while rest of the metals were trading marginally down on demand concern from China. Copper prices traded higher on potential labour strike in Chile. Workers at Antofagasta Plc’s biggest copper mine, Los Pelambres, rejected the company’s final wage offer. The mine produced 372,100 tons last year. Base metals are capped upside despite of positive global cues on policy tightening in China which may hurt demand growth. Base metals are expected to trade sideways to up for the day.

Trading Strategy:

MCX Copper March support lies at Rs. 670 and resistance at Rs. 682.

MCX Zinc March support lies at Rs. 213, resistance at Rs. 219.

MCX Nickel March support lies at Rs. 1150 with resistance at Rs. 1190.

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

By Ravindra Rao

MCX Gold April futures witnessed rebound from the key support zone of Rs 44150 as price held the support of the lower band of the downward sloping trend channel. Meanwhile, price is trading in an intermediate downward sloping channel after sliding below the long term trend line support near Rs 45200. The negative crossover of 5 (44850) and 21 (46050) day EMA might limit the gains. On the downside, key support holds around Rs 44150, followed by Rs 43900. The strength index, RSI (34) which has erased its losses and moved above 30 is indicating pullback. However it needs to sustain above 30 to rebuild the momentum in price recovery. Going by the above analysis, price is expected to move in the band of Rs 44150-45200 with a sideways bias. Only close above Rs 45200, would extend its gains further towards Rs 45500.

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Strategy:

Buy MCX Gold April at Rs 44450 with a target of Rs 45100 and a stop loss at Rs 44100.

MCX Silver May future witnessed a good rebound as price moved above the 5 day EMA of Rs 66880 and entered the previous consolidation band of Rs 66400-69400. Meanwhile, price is trading below the 21 (67910) day EMA, which could be the initial hurdle for the day. A sustained move above would push prices towards the next resistance of Rs 68600, followed by Rs 69400. On the momentum form, RSI is trading around 50 (48) suggesting sideways trend. Hence for the day, price is expected to move in the range of Rs 65800-67900 with a sideways bias.

Strategy:

Buy MCX Silver May at Rs 66500 with a target of Rs 67800 and a stop loss at Rs 65800.

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





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