Commodity Analysis

Gold likely to head north

Akhil Nallamuthu | Updated on April 05, 2020 Published on April 05, 2020

The iCOMDEX composite index of the Multi Commodity Exchange (MCX) gained 3 per cent last week as crude oil gained substantially on Friday. Gold, which declined during the first part of the week, recovered sharply towards the end, contributing to the index rally.

MCX-Crude (₹2,048)

The April futures contract of crude oil in MCX began the week with a gap-down and was trading in a sideways trend. But on Friday, the contract rallied sharply, and the price went above ₹2,000. There is a resistance band between ₹2,160 — the 21-day moving average (DMA) — and ₹2,200. The contract can extend the rally if it breaks out of these levels.

Though the relative strength index (RSI) and the moving average convergence divergence (MACD) indicators in the daily chart are in the bearish zone, there are signs of the momentum turning in favour of the bulls. Hence, traders can go long in the contract with a stop-loss at ₹2,100 if it rallies past the resistance band.

MCX-Gold (₹43,722)

Even though the major trend is bullish, the June futures contract of gold in MCX is struggling to establish a sustainable rally. The contract found support at 21-DMA, from where it rebounded after a decline, but it faces a minor resistance at ₹44,000. The daily RSI is above the midpoint level of 50 and the MACD indicator in the daily chart is in the positive territory, both corroborating the bullish bias.

Considering these factors, traders can initiate fresh longs with a stop-loss at ₹43,000 if it moves above ₹44,000.

On the upside, it might rally to ₹45,360 and ₹46,000.

MCX-Silver (₹41,223)

The May futures contract of silver in MCX, which had been consolidating last week, rallied on Friday. With a close at ₹41,223, the weekly change remained flat. But for the contract to advance further, it should breach ₹42,000 since it is a hurdle. Though the daily RSI remains below the midpoint level of 50, it has been in an upward trajectory for the past two weeks. The MACD indicator in the daily chart is in the positive territory. Since ₹42,000 is a resistance, traders can buy the contract with the stop-loss at ₹40,000 if it breaks out of ₹42,000. The short-term targets can be at ₹44,000 and ₹45,000.

MCX-Copper (₹380.1)

The April futures contract of copper in MCX opened lower last week. But it recovered and ended the week marginally higher. However, the contract remains in a sideways trend between ₹365 and ₹384. Unless it breaches either of these levels, the next leg of the trend cannot be confirmed. Notably, the major trend is bearish.

Moreover, the daily RSI remains below the midpoint level of 50. But the MACD indicator on the daily chart, though in negative region, has been indicating bullish bias of late. Nevertheless, traders can stay on the sidelines until the contract remains range-bound. The support below ₹365 is at ₹355, whereas the resistance above ₹384 is at ₹397.

NCDEX-Soybean (₹3,702)

The April futures contract of soyabean in the National Commodities and Derivatives Exchange, which has been rising for the past two weeks, faced a resistance between ₹3,836 and ₹3,890 last week. On the back of the resistance, the contract declined last week, indicating that it may have resumed the downtrend after the corrective rally.

The 50-DMA coincides with the resistance band, making it a strong hurdle. Until the contract price remains below that level, the likelihood of a further decline is more. Hence, traders can short the contract on rallies with a stop-loss at ₹3,890. On the downside, the support levels are at ₹3,625 and ₹3,600.

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Published on April 05, 2020
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