Commodity strategies: Gold, silver, crude, base metals

Ravindra Rao

MCX Gold futures bounced for the second consecutive day ahead of today’s key FOMC meeting outcome. Gold has moved above the high of the bullish engulfing pattern at Rs 46,400, suggesting reversal in the bearish trend. Now, its 20-day EMA (Rs 46,850) holds an immediate resistance, followed by Rs 47,125 (50-DEMA), which could limit the upside. The momentum oscillator RSI (at 45) has erased some of its losses and moved towards neutral territory, which is a sign of accelerating positive momentum. So in the near term, the price is expected to move in the wide range of Rs 46,050-47,125 with a sideways bias. Only a close above Rs 47,125 would continue its rebound towards Rs 47,400. On the flip side, a move below Rs 45,800 can negate the positive momentum.

Trading Strategy: Buy MCX Gold Oct at Rs 46,400. Target: Rs 47,100. Stop loss: Rs 46,050.

MCX Silver futures followed the path of the yellow metal and witnessed a good rebound from its key support levels near Rs 59,200. The broad trend in silver seems weaker as price is hovering below the previous low support at Rs 61,200 and 5-day EMA, which could be the key resistance for the day. Meanwhile, price hit the lower bound support of the regression channel (-2 SD) and witnessed a rebound, suggesting a phase of recovery. However, the price is still hovering below the midline of the band at Rs 61,500, which could be the first hurdle. A move above the midline would confirm the reversal in the trend and push the price towards Rs 62,600 (20-day EMA). So for the day, the price might consolidate in the band of Rs 59,200-61,500 with sideways to higher bias. Either side break of the range would bring more clarity in the trend.

Trading Range: Rs 59,200-61,500

(Ravindra Rao is CMT , EPAT, VP-Head Commodity Research, Kotak Securities Ltd. Views are his own)

Tapan Patel

Here is a look at how different commodities are behaving in today’s market.

Outlook: Bullion
Bullion prices traded firm on Wednesday with spot gold prices at COMEX up 0.15% near $1,776 per ounce while spot silver prices at COMEX rose by more than 1% near $22.76 per ounce in morning trade. The precious metals recovered on risk off sentiments over China's property market crisis. The speculation ahead of US FOMC and uncertainty over China's Evergrande debt crisis has sent mixed cues to the market boosting buying in bullion. The dollar index and US bond yields were steady, awaiting US FOMC outcome. Bullion prices may trade sideways to up for the day.

Trading Strategy: MCX Gold October resistance for the day lies at Rs 46,800 per 10 gram with support at Rs 46,200 per 10 gram. MCX Silver December support lies at Rs 59,500 per kg, resistance at Rs 61,800 per kg.

Outlook: Crude Oil
Crude oil prices traded higher on Wednesday with benchmark NYMEX WTI up 1.08 per cent near $71.25 per barrel in morning trade. Crude oil prices extended gains on US supply concerns and expectations of bullish weekly inventory data. The US API data showed that US crude stocks fell by 6.1 million barrels for the week ended Sept 17. The slower than expected output recovery from Gulf of Mexico is still a supply concerns for US oil market. We expect crude oil prices to trade up for the day.

Trading Strategy: MCX Crude Oil October support lies at Rs 5,210 per barrel with resistance at Rs 5,360 per barrel.

Outlook: Base Metals
Base metals prices traded higher on Wednesday with recovery in most of the metals. Earlier, base metals declined as concerns mounted over possible fallout from China Evergrande Group’s debt crisis. Base metals recovered on Wednesday on easing concerns from Evergrande and recovery in equity indices. Nickel prices may limit downside as Indonesia’s plans to ban or tax exports of semi-processed products used to make stainless steel. Base metals may trade sideways to up for the day.

Trading Strategy: MCX Copper September support lies at Rs 698 and resistance at Rs 715. MCX Zinc September support lies at Rs 254 resistance at Rs 262. MCX Aluminium September support lies at Rs 228 with resistance at Rs 234.

(Tapan Patel is Senior Analyst, Commodities, HDFC securities. Views are his own)