Commodity Analysis

Gold may moderate before advancing

Akhil Nallamuthu | Updated on August 09, 2020 Published on August 09, 2020

October futures likely to bounce off ₹54,000

Energy commodities and precious metals powered the rally in the iCOMDEX, the composite index of the Multi Commodity Exchange (MCX), which gained just over 4 per cent last week.

Notably, all the commodities were bullish, and as asset classes they, have been performing well, especially since the beginning of July.

This trend is set to continue in the forthcoming sessions as well, and the index is likely to go up.

MCX-Crude (₹3,095)

The August futures of crude oil bounced from the support of ₹2,980, and last Wednesday, it broke out of the critical resistance at ₹3,100 and marked an intra-day high of ₹3,263. However, the contract erased all the gains during the same trading session and closed below ₹3,100.

Essentially, it remains within the range between ₹2,980 and ₹3,180. The relative strength index (RSI) and the moving average convergence divergence (MACD) stays flat. Prolonged consolidation will increase the likelihood of a downtrend.

Traders can remain on the sidelines until the contract decisively breaks on either side; initiate fresh positions along the direction of the break. The resistance above ₹3,100 is at ₹3,380 whereas the support below ₹2,980 is at ₹2,650.

MCX-Gold (₹54,789)

The October futures of gold on MCX, after beginning on a positive note, rallied to register a fresh high of ₹56,191 on Friday. But in the latter half of the session, the contract faced selling pressure and declined.

However, the overall uptrend is intact and the likelihood of further rally is high.

As the price declined towards the end of the week, the daily RSI has come off its peak, but it remains in the positive region.

Whereas, the MACD retains the upward trajectory and lies in the bullish zone.

Since the trend is bullish and the drop in price will most likely be a retracement.

So, traders can initiate fresh long positions in declines with a stop-loss at ₹53,400.

On the upside, the contract is likely to retest the lifetime high, and above that level, it might rally to ₹56,500.

MCX-Silver (₹74,160)

The September futures of silver on MCX rallied last week and marked a fresh high of ₹77,949 on Friday before wrapping up the session at ₹74,160.

Therefore, the contract gained about 14 per cent in the past one week, and the uptrend looks very strong. While the MACD is indicating considerable upward momentum, the daily RSI has not formed a fresh peak like the contract. Though this is not an outright signal of bearish reversal, traders should closely watch how it responds going forward.

The contract is charting a substantial bull trend and so traders can buy the contract on dips with a dynamic stop-loss.

While the initial stop-loss can be placed at ₹70,000, move it upwards with a gap of 1.5 times the daily average true range.

MCX-Copper (₹502)

The August futures of copper appreciated last week and registered a fresh high of ₹516.4 last Thursday.

But unable to hold on to the gain, it declined and closed the week almost on a flat note. So, the contract continues to trade within the range between ₹500 and ₹510.

The contract is currently testing the 21-day moving average (DMA). A break below that can turn the near-term outlook negative. The weakness in contract is also indicated by the RSI and the MACD in the daily chart. Even though the contract looks unsettled, it has a support at ₹500 and until that level is breached, a bearish reversal cannot be confirmed.

So, traders can initiate fresh long positions with a stop-loss at ₹488. On the upside, the contract is likely to move past the prior high and rally to ₹520 and ₹525.

NCDEX-RM seed (₹5,286)

The August futures of RM seed (mustard seed) at the National Commodities and Derivatives Exchange (NCDEX), after opening slightly lower last week, regained traction and started to move up. It registered a high of ₹5,392 before closing the week at ₹5,286.

Corroborating the bullish view, the daily RSI has been rising along with the contract price and the MACD is showing an increased positive momentum as it charts an upward trajectory.

Considering the above factors, traders can be bullish and go long on the contract on declines with a stop-loss at ₹5,000.

From the current levels, the contract is likely to advance to ₹5,450 and possibly to ₹5,500.

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

Published on August 09, 2020
This article is closed for comments.
Please Email the Editor