Commodity Analysis

Gold oscillates within a tight range

Akhil Nallamuthu | Updated on November 17, 2019 Published on November 17, 2019

Futures contract of MCX gold is consolidating between ₹38,650 and ₹37,690

MCX COMDEX, the composite commodity index of the Multi Commodity Exchange (MCX), has been moving in a sideways trend since the beginning of November. Crude oil, its largest component, witnessed a marginal gain, whereas gold, the- second-largest component, continues to be sluggish.

Unless there is a significant movement in any of its key components, it is expected to stay within 3,922 and 3,971. Noticeably, crude oil and gold contribute to around 50 per cent to the index weight.

MCX-Crude (₹4,153)

After hovering around the resistance at ₹4,100 for a while (the 50 per cent Fibonacci retracement level of the previous downswing coincides with this price), the December futures contract of crude oil moved past this level and closed slightly higher at ₹4,153. The prevailing upward momentum seems to have aided the price to inch higher.

The 21-day moving average has crossed the 50-day moving average, indicating a positive outlook in the near term.

The daily relative strength index (RSI) and the moving average convergence divergence indicator is showing considerable strength. Hence, the contract will most likely appreciate further, and it will face a hurdle at ₹4,200. Above this level, the resistance is at ₹4,314. But if the price starts trending downwards from the resistance level, the decline might be arrested at ₹4,100. Below that, the contract might fall to ₹4,000.

MCX-Gold (₹37,994)

Oscillating within the tight range between ₹38,650 and ₹37,690, the December futures contract of gold continues to trend sideways. The contract has been in a consolidation phase since the beginning of October.

Taking a broader view, one can spot a strong resistance at ₹39,000 above the upper limit of the range, and a strong support at ₹37,206 below the lower limit of the range.

So, unless the contract breaches either ₹37,206 or ₹39,000, the trend’s next leg cannot be confirmed. While the moving averages are unable to give any clue, the daily RSI and the moving average convergence divergence indicator, too, are flat. A breakout of ₹39,000 can lead to an important resistance at ₹40,000, whereas a break below ₹37,206 can turn the medium-term trend bearish, dragging the price to ₹36,310.

MCX-Silver (₹44,445)

The December futures contract of silver inched up last week on the back of the support band between ₹43,875 and ₹44,315 — the 50 per cent Fibonacci retracement level of the previous bullish trend. But on the upside, the contract was capped at ₹44,800. Though the upward movement in the price resulted in a minor uptick in the daily RSI, the moving average convergence divergence indicator remains in the negative territory, indicating a bearish bias.

Adding to the weakness, the 21-day moving average continues to stay below the 50-day moving average. If the contract continues to appreciate from the current level, it will face a hindrance at ₹46,000, followed by a resistance at ₹46,950. However, a break below the support band could turn the medium-term trend bearish, dragging the price to ₹42,620 with ₹42,000 as its immediate support.

MCX-Copper (₹437.7)

Unable to appreciate beyond the resistance at ₹446, the price of November futures contract of copper slumped over the past week. It is currently trading near the support at ₹436, and the contract seems to have formed a range between ₹436 and ₹446. Hence, the next leg of the trend can be confirmed only if the price moves out of the range.

The daily RSI and the moving average convergence divergence is flattish, as the price is fluctuating within a range; whereas the 21-day moving average lies below the 50-day moving average, giving the contract a negative bias.

If the contract bounces, taking support at the current level, it will most likely rise to the upper boundary of the range at ₹446. Beyond that level, the contract can appreciate to ₹460.

Alternatively, if the price breaks below ₹436, it could intensify the sell-off, dragging the price down to ₹430.

NCDEX-Soyabean (₹3,968)

The December futures contract of soyabean is consolidating within a range between ₹3,927 and ₹4,085. The 23.6 per cent Fibonacci retracement level of the previous bullish trend is at ₹3,952, making the price band between ₹3,927 and ₹3,952 a considerable support.

Thus, until the contract stays above that level, it can be approached with a bullish bias.

If the price begins to appreciate, it will face a resistance at ₹4,085. Above that level, the contract might attract good buying interest, lifting the price to ₹4,240. However, one needs to be cautious as there are signs of weakness, as indicated by the daily RSI and the moving average convergence divergence indicators. Both indicators did not register a high peak during the previous rally. Hence, a decisive break below ₹3,927 can turn the short-term trend bearish, pulling down the price to ₹3,793.

Published on November 17, 2019
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