Commodity Analysis

Gold might consolidate going forward

Akhil Nallamuthu | Updated on February 10, 2020 Published on February 09, 2020

April futures of gold oscillate between ₹40,000 and ₹41,300

MCX COMDEX, the composite commodity index of the Multi Commodity Exchange (MCX), weakened last week, even as its largest component, crude oil, traded flat.

The decline was led by gold and silver, as both the precious metals faced downward pressure.

But towards the end of the week, the index recovered and closed at 3,798. Its previous weekly close was 3,833.

Since crude oil, gold and silver are trading in a sideways trend, there might not be much of volatility in the index.

MCX-Crude (₹3,617)

The bearish trend in crude oil seems to have taken a pause and the February futures contract at the MCX was fluctuating in a tight range last week, between ₹3,551 and ₹3,724.

Thus, the contract could decline further if it breaches the lower limit of the range. The daily Relative Strength Index (RSI) is in the over-sold levels and the Moving Average Convergence Divergence (MACD) indicator in the daily chart is exhibiting signs of the bears losing strength.

Hence, traders are advised to stay on the sidelines until either ₹3,551 or ₹3,724 is breached.

Considering that the major trend is negative, sell the contract with a tight stop-loss if it breaks below ₹3,551.

MCX-Gold (₹40,644)

Gold faced selling pressure during the first half of last week and, as a result, the April futures contract of the yellow metal at the MCX declined to the crucial support at ₹40,000.

The contract, however, bounced back from that level and recouped some of its losses, closing the week at ₹40,644. The daily RSI and the MACD indicator in the daily chart stay flat.

The price action in the daily chart hints that the contract might head into a consolidation phase, with potential limits at ₹40,000 and ₹41,300. So, traders are recommended not to initiate new positions until either of these levels are broken. Above ₹40,000, the contract has a resistance at ₹42,000. On the downside, below ₹40,000, the support is at ₹39,430.

MCX-Silver (₹46,106)

Like gold, silver witnessed selling pressure during the first half of last week and then recovered towards the end of the week.

The March futures contract seems to be restricted between two key levels of ₹45,400 and ₹47,250. Until either of these levels are breached, the metal can be expected to be in a sideways trend.

The RSI and the MACD indicator in the daily chart remain flat.

Considering the above, traders can opt for a range-trading strategy until the contract moves out of the above-mentioned price band.

The resistance above ₹47,250 is at ₹48,100, whereas the support below ₹45,400 is at ₹44,615.

MCX-Copper (₹430.9)

The price of copper recovered last week and so the February futures contract of the metal rallied and closed last week with a gain. The metal had closed in the red in the preceding two weeks. The contract faced considerable resistance at ₹440 levels, where it coincides with the 21-day moving average. Hence, as long as the contract stays below ₹440, it will be bearish. The RSI and MACD indicator are in the bearish zone.

Traders can short the contract with a dynamic stop-loss. While the initial stop-loss can be placed at ₹442, move it downwards if the contract makes new lows with a gap of 1.5 times the daily average true range indicator.

On the downside, the supports are spotted at ₹426 and ₹421.

NCDEX-Soyabean (₹4,050)

The March futures contract of soyabean at the National Commodities & Derivatives Exchange (NCDEX) broke out of a resistance at ₹4,100 during last week. However, the contract immediately gave away the gains as it faced a strong resistance at ₹4,200.

This indicates good selling interest as traders seem to be shorting the contract on rallies.

The contract has a support band between ₹3,970 and ₹4,000.

Traders are advised to initiate fresh short positions only if the contract breaks below ₹3,970.

For such short positions, the stop-loss can be at ₹4,100.

Published on February 09, 2020
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