Commodity Analysis

Gold set to scale new heights

Akhil Nallamuthu | Updated on April 12, 2020 Published on April 12, 2020

June futures closes above ₹45,000, opening the door for further gains; silver consolidates

The iCOMDEX,the composite index of the Multi Commodity Exchange (MCX), went up last week as two of its largest components, crude oil (33 per cent weight) and gold (17 per cent weight) advanced. The index gained a little over 3 per cent. Going forward, as there is a possibility of a rally in crude oil and gold, the index can be expected to go up further.

MCX-Crude (₹2,080)

The April futures contract of crude oil in MCX, after witnessing a decline, recovered and closed the week marginally higher than the preceding week.

Though the current price is above ₹2,000 — the 21-day moving average (DMA) — the contract is struggling to break out of this level. The contract should close above that level to attract significant buying interest.

The daily relative strength index (RSI) is in a considerable upward trajectory.

Also, the moving average convergence divergence (MACD) indicator in the daily chart is showing a positive momentum.

Thus, the contract is upward-biased.

Though there are indications of a potential rally, the contract faces a resistance at ₹2,100.

Hence, traders can go long in the contract with a stop-loss at ₹1,860 if the price breaks out of ₹2,100.

The resistance levels are at ₹2,200 and ₹2,320.

MCX-Gold (₹45,294)

The June futures contract of gold in MCX witnessed a gap-up open and registered a fresh one-year high of ₹45,724 on Tuesday.

But then the contract slightly moderated, before ending the week at ₹45,294. The previous high was ₹45,361, recorded in early March. Notably, the contract has closed above ₹45,000, opening the door for further strengthening.

Substantiating the positive bias, the daily RSI is showing a good bullish strength and the MACD indicator in the daily chart is in the positive territory. Considering these factors, traders can initiate fresh longs on declines with a stop-loss at ₹43,900. On the upside, it might rally to ₹46,000 and ₹47,000.

MCX-Silver (₹43,502)

The May futures contract of silver in MCX had a gap-up opening, but consolidated throughout the week, and on weekly basis, closed with a gain of 5.5 per cent, outperforming gold futures (which gained by 3.6 per cent last week).

The price is now above the 21-DMA and faces an immediate resistance at ₹44,160 — the 50-DMA.

The daily RSI has crossed above 50 and the MACD in the daily chart has been rising in the past two weeks — both are indications of good bullish momentum. But for the contract to make further gains, it should breach the hurdle at ₹44,160.

Considering the aforementioned factors, traders can initiate fresh long positions with a stop-loss at ₹41,600 if the contract moves above ₹44,160. The resistance levels are at ₹46,000 and ₹47,780.

MCX-Copper (₹391.8)

Last week, the April futures contract of copper in MCX broke out of the consolidation range between ₹365 and ₹384. The contract rallied and ended the week at ₹391.8 — its 21-DMA. With that, the contract has posted gains for a second consecutive week — a bullish indication. The daily RSI has moved up in tandem with the price, but remains below the midpoint level of 50. On the other hand, the MACD indicator in the daily chart is signalling a shift in momentum in favour of the bulls.

Hence, on the back of these positive indications, traders can buy the contract on dips with a stop-loss at ₹375. The nearest resistance is at ₹400. At this level is the 50 per cent Fibonacci retracement of the previous bear trend, making it a significant level.

A breakout of that level can take the contract to ₹416.

NCDEX-Soybean (₹3,826)

The April futures contract of soyabean in the National Commodities and Derivatives Exchange (NCDEX) strengthened last week. Nevertheless, the price stays below the resistance at ₹3,900.

But the contract has formed a considerable base at ₹3,660. So, until the price stays within ₹3,660 and ₹3,900, the contract cannot establish a trend.

The daily RSI is above the mid-point level of 50 and the MACD indicator in the daily trend is on the verge of entering the bullish territory. These indications show that the contract is biased towards upside. But there is a resistance at ₹3,900.

Hence, traders can go long in the contract with a stop-loss at ₹3,740 if the contract breaks out of the resistance at ₹3,900. Above that level, the contract can potentially rally to ₹4,050.

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Published on April 12, 2020
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