Commodity Analysis

Gold continues to trade sideways

Akhil Nallamuthu | Updated on October 20, 2019 Published on October 20, 2019

The yellow metal has a crucial resistance at ₹40,000

The iCOMDEX Composite index — the commodity index of Multi Commodity Exchange — closed at 596.7. It did not witness much volatility and traded sideways last week.

This was because the three largest components of the index — crude oil, gold and silver — were trading flat in this period.

The index continues to trade below the important level at 600, which is also the 23.6 per cent Fibonacci retracement level of the previous bear trend.

The 21-day moving average has gone below the 50-day moving average which reaffirms the weakness implying higher chances of further depreciation.

Hence, a close above 600 on a daily basis is a prerequisite for the index to stage a meaningful recovery. Until then, it can be viewed with a bearish bias.

MCX-Crude (₹3,825)

The breakout in the week prior looked promising and the crude oil price was expected to accelerate last week. However, the November futures contract was sluggish, fluctuating within a narrow range between ₹3,773 and ₹3,900.

The upside was restricted by the 21-day moving average at ₹3,901, and the contract is currently hovering around ₹3,843, the 23.6 per cent Fibonacci retracement level of the previous downtrend.

Both the daily relative strength index and the moving average convergence divergence are flat, unable to provide any indication.

A recovery in price will find an immediate resistance at ₹3,900. Above that, the contract can even move upwards to ₹4,080.

But if the price breaks below ₹3,773, the next support is at ₹3,710.

MCX-Gold (₹38,089)

Gold continues to stay flat as the December futures contract of gold trades within the price band of ₹38,000 and ₹38,650. Prolonged sideways movement shows indecisiveness among the traders. The daily relative strength index is, flat, whereas the moving average convergence divergence is in the negative territory.

It should be noted that the 21-day moving average has gone below the 50-day moving average, indicating a weakness.

If the contract breaks below the support of ₹38,000, it will most probably decline to ₹37,200. Below that level, the medium-term trend will turn bearish. This could pull down the price to ₹36,310.

On the upside, ₹38,650 will act as a resistance. The subsequent resistance is at ₹40,000.

MCX-Silver (₹45,453)

Silver is in a consolidation phase with the December futures contract oscillating between ₹44,860 and ₹46,424. T

he outlook will remain neutral until it breaks the limits of this range. Notably, the contract price is trading below the 21-day moving average, which in turn has gone below the 50-day moving average — a bearish signal.

The daily relative strength index is flat, but the moving average convergence divergence is in negative region.

In case the contract breaks below ₹44,860, there is a support at ₹44,000. A break below that level will shift the medium-term trend bearish, and the price could tumble to ₹42,450. Alternatively, an upward movement will face a hurdle at ₹46,424, a break of which could take the contract to ₹48,000.

MCX-Copper (₹440.6)

After breaking out of the range, the commodity could not capitalise the bullish momentum, and the price of October futures contract of copper corrected the past week. The price reversed the upward movement after testing the 21-day moving average.

But on Friday, the contract closed on a positive note, above the support of ₹440. In the daily time-frame, one can observe a morning star candlestick pattern, signalling a bullish trend reversal. If the commodity can regain the bullish momentum from the current levels, the contract can move up towards ₹460 over the medium term.

Before that, ₹445 can act as a minor resistance. But if the price depreciates from the current levels, the decline can be arrested by a support band between ₹432 and ₹435.

NCDEX-Soyabean (₹3,737)

Bouncing from the support of ₹3,626, the November futures contract of soyabean climbed last week. It eventually broke out of the range between ₹3,626 and ₹3,715 and closed the week at ₹3,737, returning a positive 2.1 per cent.

The price has also moved past the 21-day moving average, which is at ₹3,710. The contract seems to have resumed its bull trend, making the short- term outlook bullish. On the upside, the contract will face a resistance at ₹3,785, beyond which it will most probably retest its previous high of ₹3,864.

On the other hand, a decline from the current level will drag the contract to the support at ₹3,715, and ₹3,626 below it.

Published on October 20, 2019
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