Commodity Analysis

Gold is losing momentum

Akhil Nallamuthu | Updated on May 10, 2020 Published on May 10, 2020

Silver, gaining 4%, outperformed gold, which stayed flat last week

The iCOMDEX composite index of the Multi Commodity Exchange (MCX) gained nearly 2 per cent last week on the back of a strong rally in crude oil — its largest component with 33 per cent weight.

Gold — the second-largest component with 17 per cent weight — was largely ineffective as it stayed flat.

If the crude oil price rally sustains, the index can move up in the coming week.

MCX-Crude (₹1,837)

The May futures contract of crude oil in MCX went up significantly and gained 21 per cent over the past week. The contract even traded above the ₹2,000 mark briefly and registered an intra-week high of ₹2,043. Also, the price rallied past the 21-day moving average (DMA). Thus, the indications are clearly bullish.

The daily relative strength index (RSI) and the moving average convergence divergence (MACD) indicator in the daily chart are showing signs of further upmove.

Though the contract is likely to go up, the resistance at ₹2,000 is critical. Hence, traders can initiate fresh long positions if the price decisively breaks out of that level. While the stop-loss can be at ₹1,740, the potential targets are ₹2,200 and ₹2,400.

MCX-Gold (₹45,812)

For the past two weeks, the June futures contract of gold in MCX has been moving in a sideways trend between ₹45,000 and ₹46,500. Though the trend prior to that was bullish, a prolonged consolidation at current levels increases the possibility of a trend-reversal.

The daily RSI is flat, following a horizontal price movement.

But the MACD indicator has reversed its trajectory downwards — an indication of a reversal.

Despite the above factors, the contract has a strong support at ₹45,000. So, traders can short the contract if the price breaks below that level.

The stop-loss can be at ₹46,000. The key supports below ₹45,000 can be spotted at ₹44,000 and ₹43,700.

MCX-Silver (₹43,293)

The July futures contract of silver in MCX closed last week with a gain of 4 per cent, at ₹43,293. It closed above both the 21- and 50-DMAs. Notably, both the moving averages coincide at ₹42,800.

While the daily RSI has moved above the midpoint level of 50, the MACD indicator remains flat.

While the immediate hurdle is at ₹43,430, the contract should breakout of the key level of ₹45,000 to establish a sustainable rally. And, on the downside, ₹41,000 is a strong support.

Thus, traders can hold back fresh positions until either of these levels are breached. The resistance above ₹45,000 is at ₹46,500, whereas the support below ₹41,000 is at ₹39,500.

MCX-Copper (₹407.6)

The May futures contract of copper in MCX went up last week by taking the support of 21-DMA at ₹398. After briefly trading below the key level of ₹400, the contract recovered, but it currently faces a resistance of ₹410.

A breakout of this level can turn the trend bullish.

The RSI and the MACD in the daily chart are indicating a bullish bias. While the RSI remains above the midpoint level of 50, the MACD has entered the positive territory.

Traders can thus initiate fresh long positions with a stop-loss at ₹395 if the contract strengthens above ₹410. The resistance levels are at ₹426 and ₹435.

NCDEX-Soybean (₹3,844)

The May futures contract of soyabean in the National Commodities and Derivatives Exchange (NCDEX) has extended the consolidation phase as it remains within the range ₹3,600 and ₹3,900.

It has been fluctuating within these levels for little over a month, and unless the price breaches either of these levels, the next leg of the trend will be uncertain.

Despite consolidation, the RSI and MACD indicator in the daily chart exhibit bullish signs.

However, for the contract to establish a sustainable rally, it should breakout of ₹3,900.

Considering the above factors, traders can buy the contract above ₹3,900. The stop-loss can be at ₹3,700.

Above ₹3,900, the resistance levels are at ₹4,000 and ₹4,200.

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Published on May 10, 2020
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