Commodity strategies: Gold, silver, crude, base metals

By Tapan Patel

Commodity prices traded higher on Friday, continuing a steady trading from the previous session. On Thursday, most of the commodities in the non-agro segment witnessed a rally except crude oil. Bullion prices traded higher breaking the near term resistance range while base metals extended gains on strong demand optimism. Crude oil prices continued to weigh on higher supply and weak demand mechanism. Here is a look at how different commodities are behaving in today’s market.

Outlook: Bullion
Bullion prices traded higher with spot gold prices at COMEX were trading near $1820 per ounce while spot silver prices at COMEX were trading over half a percent up near $27.49 per ounce in the morning trade. Bullion prices were boosted by a fall in dollar index and decline in US bond yields. The 10 year US Treasury yields fell to 1.56 per cent on Thursday while dollar index fell below 91 mark. Gold prices rose to 10 week highs breaking the important resistance at $1800 while silver prices rallied on strong demand outlook for industrial metals. We expect bullion prices to trade higher for the day keeping an eye on key US Job market data in the evening session.

Trading Strategy:
MCX Gold June resistance for the day lies at Rs. 48000 per 10 grams with support at Rs. 47400 per 10 grams.
MCX Silver May support lies at Rs. 70500 per KG, resistance at Rs. 74000 per KG.

Outlook: Crude Oil
Crude oil prices traded higher as benchmark NYMEX WTI crude oil prices traded 0.60 per cent up to $65.10 per barrel in the morning trade. Crude oil prices pared previous losses supported by broader rally in global commodities. A weaker dollar also boosted buying in crude oil while stronger data from China has improved demand outlook for the year. China’s crude oil imports rose by more than 7 per cent in 2021 compared to last year. We expect crude oil prices to trade higher for the day.

Trading Strategy:
MCX Crude Oil May support lies at Rs. 4750 per barrel with resistance at Rs. 4890 per barrel.

Outlook: Base Metals
Base metals prices traded higher as most of the metals extended gains on Friday supported by a robust trade data from China. Trade figures from China on Friday showed total exports rose more than expected in April and imports climbed, reflecting strong domestic and international demand as well as surging commodity prices. Copper, Zinc and Aluminium prices led the gains on strong demand and China–Australia trade tensions. Base metals are expected to trade higher for the day.

Trading Strategy:
MCX Copper May support lies at Rs. 770 and resistance at Rs. 786.
MCX Zinc May support lies at Rs. 232, resistance at Rs. 240.
MCX Nickel May support lies at Rs. 1290 with resistance at Rs. 1370.

(Tapan Patel is Senior Analyst (Commodities) at HDFC Securities)

By Ravindra Rao

In Thursday’s session, MCX Gold futures broke the resistance of Rs. 47100 and traded higher above Rs. 47400. For the day, the momentum seems to be bullish, however the release of US Non-farm payroll data in the evening might keep prices volatile. Price is trading above the 8 and 20 DMA which is a bullish indication. Immediate support for the day is at Rs. 47400 followed by Rs. 47100. Similarly resistance is pegged at Rs. 48000 followed by Rs. 48400. For the day, although the price momentum seems to be bullish, one needs to be cautious due to the release of Non-farm payrolls data. Dips towards Rs. 47400 might attract buying for a target of Rs. 48000.

Strategy:
Buy MCX Gold June at Rs. 47400 with a target price of Rs. 48000 and a stop loss at Rs. 47200.

MCX Silver outperformed gold as it rose sharply amid an inverse HNS break as well as a trend line break. Immediate upside is seen at Rs. 74000. Price is trading above the 8 and 20 DMA which is a bullish indication. 8 DMA is trading above the 20 DMA also indicating a bullish bias. Support for the day is at Rs. 70800 followed by Rs. 70400. Similarly, resistance is seen near Rs. 72850 and Rs. 73800. Momentum oscillator RSI is trading near 64 which is giving bulls the edge. Dips might attract buying for the day until Rs. 70400 holds. Profit objective would be Rs. 72850 and then Rs. 73800.

Strategy:
Buy MCX Silver July at Rs. 71400 with a target price of Rs. 72850 and a stop loss at Rs. 70400.

(Ravindra Rao, CMT, EPAT is VP-Head Commodity Research at Kotak Securities)