Indian Rupee strengthened on Thursday as the economy starts to wake up after the extended lockdown period. Despite the number of new Covid-19 infections rising, businesses are starting to reopen in green and orange zone and consumer demand is returning. The expectation of stimulus package helped Rupee gain strength and the US dollar also weakened yesterday as US inflation came lower than expected. However, the gain in Rupee failed to sustain at lower levels on concerns as to how would the government fund such big economic package and how much more external borrowings would be done? This kept the Rupee under pressure. Going forward, we expect Indian rupee to trade in the range of 74.90-76.20.
Gold spot price is trading around $1,700 and in the past three trading sessions, trading in a narrow range of $1,690-$1,710. Any move in either direction should come above or below this range. Gold speculators cut back on bullish bets this week. Low bullish positioning in futures market bodes well for gold prices as this reduces the chance of a massive long-liquidation sell-off. Currently, gold’s gain is capped because of strong US Dollar on warnings of the second wave of COVID-19 infections as global lockdowns ease. The currency is considered a safe store of value rivalling gold in times of economic and political uncertainty. In MCX, Gold prices are trading above 20 and 50 DMA so it is trading in ‘buy on dips’ environment. Very short term support comes at 45,250 where previous swing low and 20-day moving average is but trend reversal will only come below the level of 50-day moving average — 44,400.
Silver in COMEX is outperforming gold since the past three trading session where gold is going nowhere, silver is inching up. But in MCX, due to strong Rupee, silver for the past 3 trading sessions has seen lower high pattern which shows that momentum on the upside is under threat. There are similarities in 2008 and 2020 where we are seeing the same quarterly sell off in silver during those periods and making similar reversal pattern on charts. From 2008 to 2011, silver saw good recovery and now with the same setup being formed, we are bullish on silver. Another similarity is that the gold/silver ratio was at their respective highs during 2008 and in 2020. So going forward silver may surprise investors on the upside. The range of 43,600-43,700 is resistance for Silver while support comes at 41,800.
The price for Brent crude oil jumped just over 17 per cent last week to finish trading Friday at $30.97 per barrel, setting what looks to be a new floor for the global benchmark. The reasons behind the rally in crude oil prices are Saudi Arabia shifting from market offence to defense where they have also suggested cutting 1 million bpd more. They have raised a discount on their selling price. Any fresh selling can only come below $20 in WTI. We are not expecting any runaway rally as there is plenty of oil and storage are full. But short term we are still bullish as it is making higher high and higher low formation.
In Natural Gas, it is not a time to become too bullish, but the trend has shifted from selling rallies to buying dips. Natural gas consumption by industrial users has bottomed out and is beginning to increase. Natural gas on the daily chart has strong support around 119-120 so buy on dips would be appropriate around 122-121 for the target of 130 and stoploss of 118. Currently, we expect prices to slide further, so let it come near the zone of 122-121 for buying.
Buy Gold | TGT: 46,650 | Stoploss: 45,450
Gold prices are trading in a narrow range of 45,500-46,000. The trend is bullish as momentum indicator RSI_14 is trading above 50 with no divergence and price action also trading above 20 and 50 day moving average. Since the start of the May, gold prices on the daily scale has taken support at 20 day moving average consistently so short-term trend reversal will only come below 45,450. We recommend going long with expected price till 46,650 and keeping stoploss at 45,450.
Sell Copper | TGT: 395 | Stoploss: 411
Copper, since mid-April, has failed to cross 410 mark. It made ‘evening candlestick pattern’ near 410 and since have corrected till 405. The 20 and 50 day moving average are about to give sell signal crossover. We believe any upside momentum may only come above its near term resistance of 411 so sell around 408 for an expected target of 395 and stoploss of 411.
Disclaimer: Bhavik Patel is Sr. Technical Analyst (Commodities) at Tradebulls Securities. Views are personal.