Commodity prices traded mixed on Friday, after trading weak in the previous session. On Thursday, most of the non-agro commodities ended in red due to a stronger dollar. Bullion prices witnessed a sell-off on Fed’s hawkish stance, while base metals traded lower on weaker demand from China. Crude oil prices pared early gains and witnessed selling in the closing session on Friday, in line with a broader selling in commodities. The dollar index rallied by 0.83 per cent nearing the 92-mark for the day. Here is a look at how different commodities are behaving in today’s market.
Outlook: Bullion
Bullion prices traded firm on Friday with spot gold price at COMEX was trading near $1786 per ounce while spot silver price at COMEX was trading over 1 per cent higher at $26.20 per ounce in the morning trade. The precious metals witnessed a sell-off on the stronger dollar due to US Fed’s tapering signal. The Fed hinted at a hawkish stance by 2023 which boosted buying in the US dollar resulting in an outflow from the safe-haven asset. Bullion prices may see some pullback and the short-term bias to remain bearish for the precious metals. We expect bullion prices to trade sideways to down for the day.
Trading Strategy:
MCX Gold August resistance for the day lies at Rs. 47500 per 10 grams with support at Rs. 46800 per 10 grams.
MCX Silver July support lies at Rs. 67000 per KG, resistance at Rs. 69800 per KG.
Outlook: Crude Oil
Crude oil prices traded lower on Friday as benchmark NYMEX WTI crude oil price was trading 0.72 per cent down at $70.53 per barrel in the morning trade. Crude oil prices traded lower as the stronger dollar continued to put pressure on commodities on a hawkish outlook by Fed. The dollar rally has led to a lower demand outlook for oil in terms of other currencies. Crude oil prices traded weak on added pressure from the possible revival of the nuclear deal with Iran. We expect crude oil prices to trade down for the day.
Trading Strategy:
MCX Crude Oil June support lies at Rs. 5160 per barrel with resistance at Rs. 5320 per barrel.
Outlook: Base Metals
Base metals prices traded firm on Friday as most of the metals recovered from their previous losses. Base metals rebounded on a softer dollar after the two-day rally on US Fed’s rate hike signal. Base metals’ fundamentals are mixed on China’s crackdown and reports of the release of stockpiles from state reserves. On another side, economic recovery in the US and eased Covid restrictions in Europe has lifted the demand outlook for industrial metals. Base metals are expected to trade sideways to up for the day.
Trading Strategy:
MCX Copper June support lies at Rs. 695 and resistance at Rs. 708.
MCX Zinc June support lies at Rs. 231, resistance at Rs. 238.
MCX Nickel June support lies at Rs. 1260 with resistance at Rs. 1310.
(Tapan Patel is Senior Analyst (Commodities) at HDFC Securities)
By Ravindra Rao
MCX Gold futures witnessed their biggest single-day loss in this quarter, as price lost almost 3 per cent on Thursday. Price took the support of the 50 per cent Fibonacci retracement of the recent uptrend near Rs. 46840 after breaching the key support of Rs. 47550 (38.2 per cent Fibonacci level). The breakdown of the regression channel suggests a change in the trend.
A trade through Rs. 47380 (250-day EMA) reaffirmed the downtrend. The next downside support is around Rs. 46840 (50 per cent Fibonacci level), followed by Rs. 46240. Only a sustained move above Rs. 47380 (250-day EMA) could push the price towards Rs. 47850. The momentum indicator is hovering near 33, suggesting bearishness. Hence, price is expected to trade in a broad range between Rs. 46840-47380 with a sideways to lower bias. Only a sustained move below Rs. 46840 would extend the weakness towards Rs. 46240.
Strategy:
Sell MCX Gold August at Rs. 47400 with a target of Rs. 46840 and a stop loss at Rs. 47750.
MCX Silver July futures have finally breached the lower band of the broad consolidation range at Rs. 69600 and witnessed a sharp decline on Thursday. The price has breached the 50 per cent Fibonacci retracement level at Rs. 68330 suggesting weakness in the trend. Now the major support holds around Rs. 66900, which is 61.8 per cent Fibonacci level of the bull rally. Near-term resistance is seen around Rs. 69600, followed by Rs. 71300. Short-term momentum has turned negative as RSI broke down to a new low, which suggests accelerating negative momentum. So for the day, the price might continue to move in the range of Rs. 67000-69600 with a sideways to downside bias.
Strategy:
The trading range for MCX Silver lies between Rs. 67000-69600.
(Ravindra Rao, CMT, EPAT is VP-Head Commodity Research at Kotak Securities)
