Commodity Analysis

Gold may retest its all-time high...

Akhil Nallamuthu | Updated on April 26, 2020 Published on April 26, 2020

... but initiating fresh positions before it breaches ₹45,000 or ₹47,327 is not advisable

The iCOMDEX composite index of the Multi Commodity Exchange (MCX) lost about 3.6 per cent last week as crude oil, its largest component with 33 per cent weight, fell sharply. But gold, the second-largest component with 17 per cent weight, ended the week higher.

In the upcoming week, the index could fall as the outlook for crude oil looks bleak.

MCX-Crude (₹1,350)

The May futures contract of crude oil in MCX witnessed a sharp decline last week. After registering an intra-week low of ₹848, the contract closed at ₹1,350. There are no signs of a recovery and the price is likely to drop further. The daily relative strength index (RSI) and the moving average convergence divergence (MACD) in the daily chart are in the negative regions, affirming the bear trend.

Traders can thus take a bearish view and short the contract on rallies with a stop-loss at ₹1,700.

On the downside, the contract might decline to ₹1,000, and below that level, it might retest its previous low of ₹848.

MCX-Gold (₹46,427)

Despite some indications of a bearish reversal, the June futures contract of gold in MCX advanced last week. The contract thus remains above the important level of ₹45,000, and as long as the contract stays above that, the likelihood of a correction is low. At the same time, for the yellow metal to extend the rally, it should break out of the prior high at ₹47,327.

The daily RSI is above the mid-point level of 50, but it has flattened, hinting at a loss in bull strength. The MACD indicator in the daily chart, though in the positive territory, indicates that the uptrend is losing momentum.

Traders can hold themselves back from initiating fresh positions until either ₹45,000 or ₹47,327 is breached. Since the overall trend is bullish, one can buy the contract with a stop-loss at ₹46,000 if it rallies past its prior high. On the upside, it can even rally to ₹50,000.

MCX-Silver (₹42,051)

Even as the gold futures rallied, the May futures contract of silver was largely consolidating throughout the last week. The futures closed marginally lower than in the preceding week. But the price remains above the 21-day moving average (DMA). Until the price remains above ₹42,000, the possibility of an upswing is more.

But the RSI and the MACD in the daily chart are indicating that the uptrend is losing traction.

A break below ₹42,000 can trigger a considerable sell-off.

While ₹42,000 can act as a support, the contract has a resistance at ₹43,430.

So, traders can buy the contract with a stop-loss at ₹42,000 if it breaks out of the resistance at ₹43,430.

Above that level, the price might rise to ₹44,500.

MCX-Copper (₹405.7)

The price of the May futures contract of copper in MCX fell during the first half of the week, but recovered in the latter half and ended the week at ₹405.7. After briefly trading below the 21-DMA, the contract rallied above it but facing the 50-DMA resistance at ₹412.6. Corroborating the bullish bias, the daily RSI is above the mid-point level of 50, whereas the MACD indicator in the daily chart is in a considerable upward trajectory.

Traders can initiate fresh long positions in the May futures contract with a stop-loss at ₹390 if it decisively rallies above ₹413.

The nearest resistance is at ₹426. The subsequent resistance is at ₹435.

NCDEX-Soybean (₹3,776)

The May futures contract of soyabean in the National Commodities and Derivatives Exchange (NCDEX) continues to consolidate between ₹3,600 and ₹3,900.

Unless the contract breaches either of these levels, the next leg of the trend cannot be confirmed. At the current market price, both 21- and 50-DMAs coincide.

Notably, the RSI and MACD indicator in the daily chart remains in the positive territory.

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

As the contract is oscillating between ₹3,600 and ₹3,900, traders can stay on the sidelines until either of these levels are breached.

Above ₹3,900, the resistance levels are at ₹4,000 and ₹4,200; whereas, below ₹3,600, the support levels are at ₹3,300 and ₹3,216, its previous low.

Published on April 26, 2020
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