Commodity Analysis

Gold continues to move sideways

Akhil Nallamuthu | Updated on December 01, 2019 Published on December 01, 2019

February contract of the yellow metal oscillates between ₹37,500 and ₹38,950

MCX COMDEX, the composite commodity index of the Multi Commodity Exchange of India (MCX), at 3,846, declined in the past week. This was due to a weak crude oil price, the index’s largest component with 33.2 per cent weight.

MCX-Crude (₹3,980)

The December futures contract of crude oil had been moving in a sideways trend for most part of the last week. Unable to crack the resistance at ₹4,200, the contract declined on Friday and closed the week at ₹3,980. This level also coincides with the 50-day moving average, from where the contract took support and bounced two weeks ago.

Thus, the contract seems to form a range between ₹3,980 and ₹4,200, and unless it moves away from this range, the next leg of the trend is less likely to be established. There is a down-tick in the daily relative strength index (RSI), and the moving average convergence divergence, too, shows weakness.

If the contract breaks below ₹3,980, it has an immediate support at ₹3,870. Below that, the contract might weaken to ₹3,700 over the medium term. On the upside, the resistance beyond ₹4,200 is at ₹4,314.

MCX-Gold (₹38,004)

Gold continues to move sideways and the February futures contract of the yellow metal continues to oscillate between ₹37,500 and ₹38,950. The lower boundary of the range, ₹37,500, coincides with the 38.2 per cent Fibonacci retracement level, making it an important support. If the contract breaches the upper limit of the range at ₹38,950, it can result in a rally taking the price to ₹40,000.

The resistance above that level is at ₹40,800. However, if the contract breaks below the lower limit of the range at ₹37,500, the medium-term trend of gold could turn bearish. The immediate support is at ₹36,380, below which there is a support band between ₹35,110 and ₹35,335.

MCX-Silver (₹45,055)

The March future contract of silver, after moving in a sideways trend between ₹45,650 and ₹47,650, broke down in the first week of November. But what followed was another sideways trend between ₹44,240 and ₹45,650. The range is still valid, and the contract can be expected to trend only if it breaches either level of the range.

The 21 DMA continues to remain below the 50 DMA, hinting a bearish bias; however, the daily RSI and the moving average convergence divergence indicator stays flat.

If the contract breaks out of the resistance at ₹45,650, it will most likely appreciate to ₹47,650. Above the level, the resistance is at ₹49,300. On the other hand, a break below the support at ₹44,240 will turn the medium term bearish, resulting in the price tumbling to ₹41,430. The support below that level is at ₹39,500.

MCX-Copper (₹432.6)

Continuing with the bearish trend, the December futures contract of copper inched down last week and is currently testing the support at ₹432. The daily RSI and the moving average convergence divergence indicator corroborates the weakness in the contract price. Thus, the downtrend looks considerably strong and the outlook remains negative for the metal.

The contract will most likely weaken further in coming days. If it breaches the support at ₹432, it might decline to ₹425, and the next support is at ₹420. On the other hand, if the futures appreciate from the current level, it will face a hurdle at ₹437.5, beyond which it can be expected to retest the key resistance at ₹440.

NCDEX-Soysbean (₹4,075)

After briefly trading above ₹4,085 (intra-week high of ₹4,105), the December futures contract of soyabean closed at ₹4,075. Thus, the range between ₹3,927 and ₹4,085 still stays valid. The 23.6 per cent Fibonacci retracement level of the previous bullish trend is at ₹3,952, making the price band between ₹3,927 and ₹3,952 a considerable support. Hence, until the price trades above these levels, the medium term will be biased towards bullish.

However, a point of concern is the moving average convergence divergence as it hints weakness. If the contract price decisively breaks above the range top at ₹4,085, it can potentially lead to a rally towards ₹4,240. Alternatively, if the price breaks below the range bottom at ₹3,927, it can result in a short-term downtrend, dragging the price to ₹3,793.

Published on December 01, 2019
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