Commodity outlook by Bhavik Patel of Tradebulls Securities: Buy Gold, Lead

Commodities Outlook and stock recommendation by Bhavik Patel - Sr. Technical Analyst (Commodities), Tradebulls Securities

Dollar: The index has rallied to 2 years high limiting gains in Rupee. Low crude oil prices will help rupee but Chinese yuan has started depreciating against strong US dollar so gain in our rupee is limited. Despite strong recovery in Equity market and weak crude oil prices, Indian rupee weakened on account of a strong dollar. FII inflow is also expected because of the IRCTC IPO. For the week, Indian rupee is expected to trade in a range of 70.50-71.90.

Gold: We are short-term bearish on gold but very bullish for the long-term. Trump’s impeachment news is making investors flocking to safe haven US dollar. Geopolitical risk in Middle East has subsided so gold’s shine is fading. Gold is struggling because of a strong US dollar which is trading at 2 years high above 99. Next support for gold comes at $1450 and $1435 while in MCX Dec contract 36,680. Gold has managed to recover as it is trading above 20 and 50 day moving average. We said before that gold is positive as long as it is above $1504 as it is 15DMA on the daily chart in COMEX. Now that level comes to 1502 so only above $1500 we could see next stage of the rally. Underlying trend still is bullish but strong US dollar is giving pressure to gold.

Brent Crude: In 15 min chart, crude oil is trading below 20, 50 and 200 DMA. We expect Brent to come till $57-$56 and in MCX, crude oil now has support at 3650 levels. It needs to close above its 200 DMA at 4000 for fresh buying. Some of the bearish factors dragging crude oil prices down are Saudi Arabia implementing a partial cease-fire in Yemen, rumors surfaced that the U.S. is considering easing sanctions on Iran, and Saudi Arabia is poised to restore disrupted production from the damaged Abqaiq facility. This all factors have driven crude oil prices to the ground and from 16th Sept till now we have seen a correction of $10 to the tune of 15% correction.

Recommendation:

Buy Lead | TGT 156 | Stoploss 152.

Since 5th August, it has confined into a small range of 153.20 to 156.50. The narrow range is frustrating for investors and such low volatility is a precursor for bigger move. Generally, any commodity which trades in a small range for a long time gives big breakout or breakdown. Till then the range is not broken, range bound trading is recommended. Lead is near to its lower range so buy around 153.30 for expected upmove till 156 and stoploss of 152 closing basis.

Buy Gold | TGT 38700 | Stoploss 37500

Gold has managed to close above its short term moving average of 20 and 50 which is a positive and reversal sign. After making bullish belt hold, gold has given positive closing indicating buyers coming back in bulls camp. Dollar index is also near to overbought so any correction in US dollar will lead to recovery in gold. So buy gold at 37,900 with stoploss of 37,500 and target of 38,700.

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Disclaimer: Views expressed are the author's own. He may have positions in one or all of the above mentioned stocks.