Commodity Analysis

Domestic gold price in consolidation mode

Akhil Nallamuthu | Updated on November 04, 2019 Published on November 03, 2019

Unless price moves out of the current range, the next leg of trend cannot be confirmed

After breaking above the important level of 600, the iCOMDEX Composite index — the commodity index of Multi Commodity Exchange of India — remained flat over the past few days.

Falling crude prices, the largest component with 35 per cent weight dragged the index, but it was offset by rising gold, silver and zinc prices that have a combined weight of about 37 per cent.

The index remains above the 21-day moving average indicating a short-term bullish bias. At 603.2, it currently faces a resistance at 604, the 38.2 per cent Fibonacci retracement level of the previous downtrend.

Weakening crude prices are expected to exert downward pressure in the coming days, whereas a surge in the price of bullion and metals could lift the index towards a crucial level of 608. If the index moves beyond 608, it would indicate a medium-term bullish trend.

MCX-Crude (₹3,938)

After testing the resistance at ₹4,000, the November futures contract of crude oil declined last week. This was a dampener, as the commodity has been attempting to recover after its price slumped from the September high of ₹4,504. However, the price bounced back sharply towards the end of the week, after taking support at ₹3,843 - the 21-day moving average. An uptick in the daily relative strength index and the rising moving average convergence divergence provide, indicate no threat for the near-term recovery. On the upside, the contract will face hurdles between ₹3,970 and ₹4,000. Above these levels, the price can rise to ₹4,174. Supports below the current level are at ₹3,843 and ₹3,800.

MCX-Gold (₹38,310)

Though the price of December futures contract of gold gained in the latter part of the week, it largely remains within the range between ₹37,690 and ₹38,650. Since the price has been consolidating for some time, indicators are unable to give a cue on the future trend. So, unless the price moves out of the range, the next leg of the trend cannot be confirmed. Assuming that the contract breaks out of ₹38,650, it will immediately face a resistance at ₹39,000. Beyond that level, it can rise to ₹40,000. On the contrary, if the price breaches the support at ₹37,690, it can find support at ₹37,320.

MCX-Silver (₹46,392)

Like gold, silver prices have largely been moving in a sideways range, oscillating between ₹44,800 and ₹46,440. Even though the December futures contract of silver briefly traded above the upper boundary of the range, it eventually retraced below that level.

But the price action looks slightly bullish which is also supported by the moving average convergence divergence indicator. If bulls gain traction, the contract can appreciate to ₹48,000 in the short term. Above that level, it can test the psychological level of ₹50,000. But if the commodity faces selling pressure it will decline towards the lower boundary of the range at ₹44,800.

MCX-Copper (₹438.4)

October has been a volatile month for copper. The recovery, post the sell-off since the second half of September, was faced with another round of selling. But on a broader scale, one can notice the November futures contract is trading in a range between ₹436 and ₹460. Hence, the next major trend can occur only if the price moves beyond these levels. With Friday’s close at ₹438.4, the price is hovering around the bottom of the range increasing the chances of an uptrend towards the upper band. But it will face hindrances at ₹441 and ₹447. However, a break below ₹436 can drag the contract to ₹422.

NCDEX-Soybean (₹3,874)

After a correction in the first two weeks of October, the November futures of Soybean resumed its uptrend and went past the key level of ₹3,864. After repeated attempts, the futures closed above the crucial level of ₹3,800 on a weekly basis. It also marked a higher peak and the price remains above both 21- and 50- DMAs, a good bullish signal. The positive trend is corroborated by the rising moving average convergence divergence indicator.

Hence, the most likely scenario is that the contract will further appreciate from the current levels to ₹4,000, another critical resistance. But this is not without hurdles. The Friday price action has formed a shooting star candlestick pattern indicating a potential bearish reversal. On the downside, support below ₹3,864 is at ₹3,800.

Published on November 03, 2019
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