Commodity Analysis

Gold caught between bulls and bears

Akhil Nallamuthu | Updated on November 10, 2019 Published on November 10, 2019

The yellow metal traded with a bearish bias last week

MCX COMDEX, the composite commodity index of the Multi Commodity Exchange, went above the key level of 3,926 last week. This was on back of a rise in the price of its largest component — crude oil. But the subsequent consolidation in crude price and the sideways trend in gold — the second-largest component — kept further appreciation of the index in check. Going forward, the near-term bullish outlook of crude might lift the index towards 3,990.

MCX-Crude (₹4,076)

The rally in the November futures of crude oil continued last week and broke out of the crucial level at ₹4,000. The contract also closed above the resistance at ₹4,072. One can observe higher highs and higher lows in price action, indicating a substantial bullish momentum.

The daily relative strength index continues to rise, and the moving average convergence indicator is in positive territory. Hence, all factors indicate a near-term bull trend for the commodity. On the upside, it faces a resistance at ₹4,174 and ₹4,200. Alternatively, a correction from the current level could see the price sliding to support at ₹4,000.

MCX-Gold (₹37,687)

The December futures of gold continues to tread within the range between ₹37,690 and ₹38,650; it briefly traded below the range, but managed to close at the lower limit. Unless the contract breaches either of the boundaries of the range, the next leg of the trend cannot be confirmed.

On a break above ₹38,650, the contract will face a resistance immediately at ₹39,000. Above that level, the next resistance is at ₹40,000. But if it decisively breaks below ₹37,690, it will retest the previous low at ₹37,206, below which the medium-term trend might turn bearish, potentially dragging the price to ₹36,310.

MCX-Silver (₹43,872)

The December futures of silver breached the lower limit of the range at ₹44,800 and closed at ₹43,872. At this level, we can spot a support band between ₹43,875 and ₹44,315. The daily relative strength index is showing a down-tick, and the moving average convergence divergence indicator has fallen back into the negative region, hinting a bearish bias.

On the back of this, if the contract slumps below the support band, the medium-term trend might turn downwards, which could drag the price to ₹42,620. But if the contract attracts buying interest at current levels, it will move upwards to ₹44,800.

MCX-Copper (₹442.4)

The November futures of copper continues to fluctuate within a range between ₹436 and ₹460. Last week, the contract rallied and went past the hurdle at ₹441. It registered an intra-week high of ₹446.2 before closing at ₹442.4. The daily relative strength index is showing an uptick as it bounced from over-sold levels. If the recovery continues, the contract will face resistance at ₹447. Beyond that level, bullish momentum may gain traction and appreciate to the range top at ₹460. On the downside, the contract has an immediate support at ₹441. The subsequent support is at ₹436.

NCDEX-Soyabean (₹4,035)

The November futures contract of soybean continued its uptrend and broke out of a critical resistance at ₹4,000, opening the door for further appreciation. The price action indicates a substantial bullish momentum substantiated by the moving average convergence divergence indicator.

So, the contract will most likely trend upwards, and on the upside, it has resistances at ₹4,160 and ₹4,220. But one needs to be cautious as the daily relative strength index has not followed the price in making higher peaks, increasing the chances for a bearish divergence. If the price weakens, it will find supports at ₹4,000 and ₹3,800.

Published on November 10, 2019
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