Commodity Analysis

Gold bulls gather traction

Akhil Nallamuthu | Updated on June 21, 2020 Published on June 21, 2020

The August futures have broken out of ₹47,650, turning the outlook positive

The iCOMDEX, the composite index of the Multi Commodity Exchange (MCX), gained a little over one per cent last week as the price of crude oil and gold, two largest components of the index, rallied.

Going forward, the index might firm up further as the outlook for both crude oil and gold look positive.

MCX-Crude (₹3,051)

The July futures contract of crude oil in MCX posted a weekly gain of 10 per cent as it advanced after taking support at ₹2,670.

Also, the 21-day moving average (DMA) lies at that price, making it a considerable base. Immediate recovery after a correction indicates considerable bullish momentum.

The daily relative strength index (RSI), which is already above the midpoint of 50, is showing a fresh uptick. The moving average convergence divergence (MACD) in the daily chart, though flat, remains above the zero-level, indicating an upward bias.

Though the contract looks bullish, ₹3,100 can act as a hindrance. Notably, the 61.8 per cent Fibonacci retracement level coincides at that price.

So, traders can go long with stop-loss at ₹3,000 if the price breaks out of ₹3,100. The contract might rally to ₹3,250 and ₹3,340.

MCX-Gold (₹47,937)

The August futures contract of gold in MCX went up on Friday and closed above the resistance at ₹47,650. This has opened the door for further strengthening, and the likelihood of the contract surpassing its previous high of ₹48,190 looks high.

The daily RSI, which is above the midpoint level of 50, is displaying a fresh uptick, whereas the MACD indicator in the daily chart continues to stay flat. But it remains in the bullish territory.

Since the contract has breached the resistance at ₹47,650, the outlook has turned positive. Thus, traders can initiate fresh long positions on declines with a stop-loss at ₹46,500. On the upside, the contract might face hindrance at ₹49,300 and ₹50,000.

MCX-Silver (₹48,636)

The July futures contract of silver in MCX was trading in a sideways trend throughout last week and, hence, it stays within the important levels of ₹47,000 and ₹50,000. A head-and-shoulder pattern can be spotted in the daily chart with the neck level at ₹47,000. If the price breaches this level, the pattern will be confirmed, which would indicate a bearish trend reversal.

The MACD indicator in the daily chart has been tracing a downward path — a bearish indication. But the daily RSI is flat and stays above the midpoint level of 50.

The direction of the next price swing will remain uncertain until the contract oscillates between ₹47,000 and ₹50,000.

Hence, traders can stay on the fence until either of those levels are breached. Above ₹50,000, the contract might retest its prior high of ₹51,235; a break below ₹47,000 could drag the price to ₹45,000.

MCX-Copper (₹ 447.8)

Last week, the June futures contract of copper in MCX opened with a gap-down. However, the contract quickly aligned with the prevailing bull trend and rallied gradually. As a result, it ended the week marginally higher. But it stopped short of breaking out of the crucial resistance at ₹450. Nevertheless, the trend remains bullish.

Affirming the upward bias, the daily RSI stays above the midpoint level of 50, whereas the MACD indicator in the daily chart is in the upward trajectory.

Even as the contract is on an uptrend, it is facing a roadblock at ₹450. Hence, traders can initiate fresh long positions with a stop-loss at ₹440 if the price rallies past the resistance of ₹450. The contract might rally to ₹460.

NCDEX-Soybean (₹3,788)

The price of July futures contract of soyabean in the National Commodities and Derivatives Exchange (NCDEX) bounced off the support at ₹3,700 last week. Until the price remains above that level, the contract can be bullish as it has been a strong base for the past two months.

The MACD indicator in the daily chart, though in a downward trajectory, remains in the bullish zone and is showing signs of recovery. On the other hand, the daily RSI is showing a fresh uptick and has crossed above the midpoint level of 50.

Considering the above factors, traders can initiate fresh long positions with a stop-loss at ₹3,685. On the upside, the contract can rally to ₹3,925.

A breakout of that level can take the contract to ₹4,000.

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Published on June 21, 2020
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