Commodity Analysis

Gold continues to trade range-bound

Akhil Nallamuthu | Updated on October 18, 2020 Published on October 18, 2020

Unless December futures breach either ₹50,000 or ₹51,000, the next level will remain uncertain

The commodity market was sluggish last week with most commodities witnessing not much change in price. Consequently, the iCOMDEX composite index on the Multi Commodity Exchange of India (MCX) was largely flat and ended the week with a marginal loss.

Crude oil and gold continues to hover at their respective resistance levels. Nonetheless, both the commodities did not fall. During the upcoming week, if both these commodities breach their resistance levels, it can lift the index.

But if a similar price action to last week’s continues, the index will remain around the same level.

MCX-Crude (₹3,022)

The October futures contract of crude oil on MCX continued to trend along the horizontal channel — the contract has been fluctuating between ₹2,920 and ₹3,080 for about a month.

Unless either of these levels are breached, the next leg of trend cannot be confirmed.

While the relative strength index (RSI) continues to stay in the neutral region, the moving average convergence divergence (MACD) indicator on the daily chart has been gradually moving upwards; however, the latter remains in the negative territory.

Though the contract posted a marginal gain last week, and manages to stay above the 21-day moving average (DMA), it faces a strong resistance at ₹3,080, its 50-DMA. So, traders can wait for now and initiate fresh long positions with a stop-loss at ₹2,980 if the contract breaks out of ₹3,080.

Above ₹3,080, there is a resistance band between ₹3,180 and ₹3,200.

The nearest support from the current level is at ₹2,920.

MCX-Gold (₹50,547)

Last week, the December futures contract of gold on MCX opened with a gap-up and rallied to register a high of ₹51,184. But after briefly trading above a key barrier of ₹51,000, the contract fell back below that level and continued to move in a sideways trend for the rest of the week.

Since the beginning of October, the contract has been held within ₹50,000 and ₹51,000; the next level of trend will be uncertain until either of these levels are breached.

Since the trend has been largely flat recently, the daily RSI is hovering in the neutral region. Similarly, the MACD indicator on the daily chart remains flat, but lies in the negative territory.

Though the major trend is bullish until the price stays above ₹50,000, traders can stay on the fence and wait for the contract to breach ₹51,000 before initiating fresh longs — buy the contract with a stop-loss at ₹50,000 if it breaks out of the resistance at ₹51,000. In this case, the contract is likely to rally to ₹52,300. The subsequent resistance is at ₹53,500; notable support below ₹50,000 is at ₹49,300.

MCX-Silver (₹61,676)

Similar to gold futures, the December futures of silver on MCX opened on a strong foot last week. But the positive momentum could not sustain, resulting in the price moderating back to the sideways range, within which the contract has been oscillating since the beginning of October. It is currently hovering around the 21-DMA. Following the flat price movement, the RSI and the MACD indicators on the daily chart are flat.

Given the aforementioned factors, traders can stay on the sidelines for now.

Initiate fresh long positions with a stop-loss at ₹60,000 if the contract breaks out of the resistance at ₹63,400.

Above ₹63,400, the price is likely to rise towards the resistance of ₹66,000.

The subsequent resistance is at ₹67,500 — the 50-DMA. Support from the current levels can be spotted at ₹60,000 and ₹57,500.

MCX-Copper (₹527.6)

The October futures of copper on MCX was consolidating last week following a strong rally during the preceding week. Anyway, the price stays above the 21-DMA, and the major trend is inclined upwards. Given the current price action, the contract is likely to break out of the resistance of ₹533 and establish the next leg of uptrend.

Supporting the positive bias, the daily RSI lies above the midpoint level of 50, and the MACD has retained its positive slope and stays in the bullish zone.

Since the contract has a considerable resistance at ₹533, traders can wait for the price to rally past that level before initiating fresh buy positions even though the overall trend is bullish.

Buy the contract with a stop-loss at ₹517 if it breaches the hurdle at ₹533.

Above ₹533, the contract can touch ₹550 in the near term.

NCDEX-Mustard Seed (₹5,550)

The November futures contract of mustard seed (RM seed) on the National Commodities and Derivatives Exchange (NCDEX) gained about 1.6 per cent last week. It currently tests a resistance at ₹5,550, but the price action — forming higher lows — looks bullish, and the likelihood of the contract rallying from here is high.

The daily RSI, which remains above the midpoint level of 50, is showing a fresh uptick, and the MACD indicator lies in the positive zone.

Considering the above factors, traders can take a bullish view and buy on dips with a stop-loss at ₹5,450. On the upside, the price can rally to ₹5,650 and possibly to ₹5,700 if the momentum sustains.

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Published on October 18, 2020
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