Commodity Analysis

Gold might be gearing up for a fresh rally

Akhil Nallamuthu | Updated on January 19, 2020 Published on January 19, 2020

Silver too seems to have resumed bull trend

MCX COMDEX, the composite commodity index of the Multi Commodity Exchange (MCX), depreciated following a drop in the price of its major components — crude oil and gold.

Although gold looks set to rally, the upside for the index might be limited because of the weakness in crude oil price.

The latter is the largest component in the index with around 33 per cent weight. The index could have a bearish bias going forward.

MCX-Crude (₹4,162)

The February futures contract of crude oil dropped during the first half of last week, but recovered some of its losses. However, the weakness persists and the likelihood of a further decline is more. The contract has slipped below the support at ₹4,210 and the 50-day moving average, potentially turning the medium-term trend negative.

The daily relative strength index (RSI) is on a downward path and stays below the midpoint level of 50. The moving average convergence divergence indicator in the daily chart, too, hints at more weakness, as it stays in the negative region.

Thus, traders can take a bearish view and make use of the rallies to go short in the futures contract with a stop-loss at ₹4,315. The contract will find support at ₹4,022, below which it might depreciate to ₹3,780.

On the upside, the resistance levels are ₹4,210 and ₹4,315.

MCX-Gold (₹39,946)

Gold seems to have resumed its uptrend after a correction. The February futures contract of gold rebounded on the back of the 50 per cent Fibonacci retracement level of the previous uptrend at ₹39,380. The price continues to stay above both the 21- and 50-day moving averages, indicating that the bull trend is still intact; the prevailing price action indicates a further rally.

The RSI, too, shows a fresh uptick in the daily chart.

From the perspective of trading, one can initiate fresh long positions with a stop-loss at ₹39,300. The support below that level is at ₹38,900, which coincides with the 61.8 per cent Fibonacci retracement level of the previous bull trend.

On the upside, the contract will most likely rally to ₹40,800, beyond which it can appreciate to ₹41,200.

MCX-Silver (₹46,756)

The March futures contract of silver bounced from the support band between ₹45,650 and ₹46,000 last week after an initial dip in price. Thus, the recent uptrend does not seem to be under threat and the contract might rally from the current levels. The price has inched above the 21-day moving average, a bullish indication. Supporting the bullish view, the daily RSI is showing an uptick and has moved above the midpoint level of 50.

Since the recent trend has been bullish and the price action hints at a further rise in contract price, traders can buy the contract with a stop-loss at ₹45,600. The near-term targets can be at ₹48,100 and ₹49,000 — the 61.8 per cent Fibonacci retracement level of the previous bear trend.

MCX-Copper (₹454.6)

Taking the support of the 21-day moving average, the January futures contract of copper advanced during the past week.

It also moved past the 61.8 per cent Fibonacci retracement level of the previous downswing.

Though the moving average convergence divergence indicator in the daily chart indicates considerable upward momentum, the daily RSI shows signs of the bulls losing steam.

From the trading perspective, one can initiate fresh long positions on decline and place a stop-loss at ₹448 and look for a potential target at ₹463 in the coming days. Above that level, the contract can rally to ₹474. On the downside, ₹450 is good support.

NCDEX-Soyabean (₹4,196)

Unable to extend the rally beyond the 21-day moving average, the price of February futures contract of soyabean moderated during last week. In the daily chart, the contract has made a lower high, a bearish indication.

The price has slipped below the 50-day moving average, potentially turning the medium-term trend bearish.

The daily RSI has gone below the midpoint level of 50 and the moving average convergence divergence indicator continues to be in the bearish zone.

On the downside, ₹4,160 is acting as a considerable support.

Hence, traders are recommended to short the contract with a tight stop-loss only if it decisively breaks below ₹4,160.

The nearest target is at ₹4,000, where the contract might witness some short-covering.

Published on January 19, 2020
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