Web Exclusive
'Any level between Rs 45,000-Rs46,000 is ideal for investing in Gold'

Photo: Reuters
Gold saw a sharp sell-off early this week before recovering over $20 to erase most of its loss. The fact that we are now witnessing gold solidly above $1800 expresses a strong change in market sentiment from neutral to bullish. Looking at the last few trading days, we can interpret that we are witnessing period of consolidation. Major resistance is at $1,855 and next fresh leg of upmove will only come above that level.

China has just reported its producer prices climbed at the fastest pace in 3.5 years in April, reflecting a big rise in input costs. Besides, major economies are witnessing higher inflation due to higher raw material cost, lumber, steel, copper and other base metals. Gold market is yet to rally on this news and will regain its shine when inflation risk resurfaces. Any level between Rs.45000- Rs.46000 is ideal for investing in physical gold. If prices gets lower around Rs.46650 during Akshaya Trithya 2021, we would recommend investors to buy. We expect gold prices to trend higher from here on.

Silver markets, along with Gold, had fallen a bit during the course of the trading session on Tuesday as we saw rally in 10-yr US Treasury note. We think it is only a matter of time before we see another push to the upside and perhaps an attempt on the $28 level. In the short term, we believe that the 50 day-EMA should continue to offer a little bit of support, as it has been followed rather closely over the last several weeks. Large precious metals speculators sharply increased their net long positions in the Silver futures markets last week and silver speculative long hit around three month high.

Crude oil initially pulled back on May 11 before resuming its uptrend. There was formation of "hammer pattern" showing signs of exhaustion on the downside and now displaying turnaround. If we can break above the top of the candlestick for the highs of last week, that would have the market breaking above the ascending triangle and going to go looking much higher. It looks like $70 in Brent still is targeted and above that level, we could see levels till $75. Air traffic in major economies like the US and the UK have come to pre-pandemic levels and demand is set to increase going forward. OPEC+ is not decreasing any production so prices are expected to remain at elevated levels.

Natural gas markets fell a bit during the session early this week to break below the $2.90 level. Market participants are more than likely going to continue to be looking at the overall cooler temperatures in the United States as a potential catalyst to drive prices higher. At present we have no interest in going long in Natural Gas and would wait for some more correction. Prices are expected to remain sideways as as warmer than normal weather is expected to cover most of the US over the next 2-weeks

Recommendation:

Buy Crude | TGT: 4950 | Stoploss: 4650

Crude is taking support at its 20 DMA since 15th April. Formation of hammer candlestick suggests exhaustion of downside movement and resumption of uptrend. Momentum oscillator RSI_14 is neutral at 58 with no divergence on daily scale. We recommend long position with expected target of 4950 and stoploss of 4650 closing basis.

Buy Nickel | TGT: 1,365 | Stoploss: 1,305

After a strong upmove, Nickel is trading sideways which can be termed as healthy consolidation and making base for the next leg of rally on the upside. We have seen buy cross over of 20 and 50 day moving average on daily scale. Above 1345, we may see short covering and fresh long position. Momentum oscillator RSI_14 is at 63, indicating room on the upside as prices have not yet reached overbought zone. So buy at current level for expected target of 1365 and stoploss of 1305.

=================================

Disclaimer: Bhavik Patel is Sr. Technical Analyst (Currencies/Commodities) at Tradebulls Securities. Views are personal.


Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel