Commodity Analysis

Gold might extend consolidation phase

Akhil Nallamuthu | Updated on May 31, 2020 Published on May 31, 2020

The iCOMDEX composite index of the Multi Commodity Exchange (MCX) gained about three-fourth of a per cent last week.

The price of crude oil and gold, which constitute about 50 per cent weight of the index, largely remained flat.

As long as both the commodities stay sluggish, there might not be much activity in the index.

MCX-Crude (₹2,564)

The June futures contract of crude oil in MCX was trading in a tight range last week as it attempted to breach the resistance at ₹2,570. The 38.2 per cent Fibonacci retracement level of the previous downtrend coincides at this level, making it an important resistance. The contract has not fallen either, where ₹2,380 has been acting as a support.

There are bullish indications for the contract as the 21-day moving average (DMA) has crossed over the 50-DMA.

Also, the relative strength index (RSI) and the moving average convergence divergence (MACD) in the daily chart are in their respective positive territories.

Hence, traders can be bullish on the contract. But since ₹2,570 is a resistance, initiate fresh long positions if the price rallies past that level. The stop-loss can be at ₹2,370. Above ₹2,570, the contract can possibly rally to ₹2,860 and ₹3,000.

MCX-Gold (₹46,654)

The June futures contract of gold was trading flat last week. But the contract remains above the 21-DMA, giving it a bullish bias. However, the price should break out of the resistance at ₹47,500 to establish an uptrend, and a prolonged consolidation might not be good for the bulls.

Even though the RSI and the MACD indicator remain in their respective positive territory, both the indicators are signalling weaknesses.

Notably though, the contract has a good support at ₹45,000.

Considering the above factors, traders can remain on the sidelines until either of ₹45,000 or ₹47,500 are breached.

Above ₹47,500, the resistance is at ₹48,920, whereas below ₹45,000, the support is at ₹43,700.

MCX-Silver (₹50,118)

The July futures contract of silver, which had been oscillating between ₹47,000 and ₹50,000, broke out of the range and ended the week at ₹50,118.

Thus, the contract has closed with a gain for a fourth consecutive week — indicating good bullish momentum.

If the contract can sustain above ₹50,000, it can be bullish.

The price action is showing bullish bias and both the RSI and the MACD indicator are in their respective positive territories. So, traders can initiate fresh long positions on declines with a stop-loss at ₹47,000.

On the upside, the contract has its nearest resistance at ₹50,600, above which it can rally to ₹51,100.

MCX-Copper (₹416.2)

The June futures contract of copper was moving in a sideways trend last week.

The contract remains above the 21-DMA and stays above the important level of ₹410, indicating an upward bias.

Corroborating the bullish inclination, the 21-DMA lies above the 50-DMA, and the contract has been forming higher highs in the daily chart.

The daily RSI is above the midpoint level of 50, whereas the MACD indicator is in the positive region. On the back of the bullish indications, traders can initiate fresh long positions in the contract with a stop-loss at ₹405.

The resistance levels are at ₹423 (the 61.8 per cent Fibonacci retracement level of the previous trend) and ₹430, which can be the potential short-term targets.

NCDEX-Soybean (₹3,828)

The June futures contract of soyabean in the National Commodities and Derivatives Exchange (NCDEX) went up marginally last week and ended at ₹3,828. Nevertheless, the contract remains in the range between ₹3,600 and ₹3,900, within which it has been trading for the past two months.

So, unless the price breaches either of these levels, the next leg of trend cannot be confirmed.

Since the trend has been flat, the RSI and the MACD indicator in the daily chart are in the neutral region. Hence, trades can avoid fresh positions until either of ₹3,600 or ₹3,900 is breached.

The resistance above ₹3,900 is at ₹4,100, whereas below ₹3,600, the support is at ₹3,500.

Published on May 31, 2020
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