Commodity Analysis

Gold price looks shaky after late sell-off

Akhil Nallamuthu | Updated on October 13, 2019 Published on October 13, 2019

The yellow metal could weaken over the short term as price breaches a key support

The iCOMDEX Composite Index, the commodity index of the Multi Commodity Exchange, after hovering around 595 levels, attempted a recovery on Friday where the index rose above an important level at 600. However, after trading above that level briefly, it declined on the back of a late sell-off in the bullion, overpowering the positive contribution from crude oil, its biggest component. It closed the week at 598.

Thus, the resistance at the key level of 600 is still valid, and a visual inspection of the chart denotes that the attempted recovery could just be a pull-back of the broader bearish trend, where the index could resume its downward movement in the upcoming sessions led by the bullions.

MCX-Crude (₹3,869)

Crude oil, after declining for two weeks at a stretch, recovered during the past week. The October futures contract of crude oil moved past the resistance at ₹3,850 on Friday and closed the week at ₹3,869. Technically, the contract turned bullish, and will most likely appreciate and test the resistance at ₹3,975. That level is significant as the 21- and 50-day moving averages coincide with the 38.2 per cent Fibonacci retracement level.

If the bullish momentum continues and the contract breaks above that level, the positive sentiment could improve further, where it can appreciate to ₹4,250 levels over the medium term. In an alternative scenario, weakness in the upcoming session could pull down the price to ₹3,700 levels, which is a key support.

MCX-Gold (₹37,845)

The December futures contract of gold, which was kept compressed between ₹38,000 and ₹38,650 for six consecutive trading sessions, broke down below the range on Friday. The price, trading below the 50-day moving average, formed a lower high, indicating a negative outlook. This increases the possibility of the contract falling to ₹37,200, which is an important support.

Below that level, the medium-term trend could turn bearish, paving the way for a considerable decline that could take the price to ₹36,310. But if the price recovers, it will face a hurdle immediately at ₹38,650. If the contract price moves past the hurdle at ₹38,650 on the back of fresh buying interest, the price could accelerate towards ₹40,000 and even retest the 52-week high at ₹40,771.

MCX-Silver (₹45,171)

Silver has been trading flat for the past few trading sessions. But unlike gold, the December futures contract closed within the range between 44,860 and 46,424. Though the outlook looks neutral as long as the contract trades within the range, the price continues to exhibit lower highs, indicating a prevailing weakness. It is substantiated by an evening star candlestick pattern in the daily time-frame.

Assuming that the price breaks below ₹44,860, there is a support at around 44,000. A break below that level could form lower lows, dragging the contract to ₹42,450 over the medium term. On the other hand, if the price rises above ₹46,424, it will most likely appreciate towards the previous high at ₹48,000 levels, beyond which it could retest ₹50,000, a psychological level.

MCX-Copper (₹443.1)

Bouncing back from the support zone, the October futures contract of copper closed on a positive note last week. The contract closed the week at ₹443.1 after riding past a resistance at ₹440 levels. The daily relative strength index closed above the midpoint level of 50, and there is also a marginal uptick in the moving average convergence divergence indicator.

All this could take the contract price further to the upper limit of the broader range between ₹432 and ₹460. Further above ₹460, the contract will face a resistance at ₹470. However, if the rally fails to sustain and the price starts moving on the downside, it will find a strong support between ₹432 and ₹435. Below those levels, support is at ₹420 levels.

NCDEX-Soyabean (₹3,660)

After consolidating through August and in the first half of September, the November futures contract of soyabean broke out and registered a high of ₹3,864 in September. But the contract immediately faced sell-off and corrected by 61 per cent to ₹3,626 levels as measured by the Fibonacci retracement level. During the past week, though, the contract was trading flat, oscillating between the key levels at ₹3,715 and ₹3,626.

Hence, the next leg of trend can be confirmed only if the price breaches either of these levels. Above ₹3,715, the contract could potentially appreciate to ₹3,785, beyond which it could even retest its recent high at ₹3,864. Below ₹3,626, the price could find support at the 50-day moving average at ₹3,585 levels.

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Published on October 13, 2019
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