Commodity outlook by Tradebulls Securities: Buy Silver, Natural Gas

Rupee: The greenback is trading at its lowest level since July while below the critical 200-day simple moving average (DMA). Currently, RBI intervention is more supportive to exporters by protecting downside backing the same due to sluggish export figures, and that is why last couple of months, the RBI has bought dollars at every level right from Rs 70.35 to even when rupee was at Rs 71.80 to high of Rs 72.30. The current trend is expected to continue as RBI will shore up dollars to increase import cover by building reserves. So we expect Indian rupee to trade in the range of Rs 70.90-71.80 and bias is expected to remain on the upside.

Gold has been getting the lift because investors are flocking to defensive asset classes and gold is looking relatively cheaper in all defensive asset class and that is why gold is rallying at the same time as equities are going higher. Weak US dollar is also fuelling gold’s rally. Technically in the last 2 years, gold has given return of minimum 80 to 100 dollars after 15 EMA has crossed 50 EMA on the upside. The cross over came at $1490. Maintain long position until 38,700 is not breached on the downside. Gold momentum will only be lost below $1500 now. On the upside, we expect gold to test 39,500.

Silver is also seeing late year rallies. For the second time, most of the analysts think silver should rally as silver is undervalued compared to other precious metals like gold, platinum, and palladium. Above $18, there is a room till $18.25 to $18.30. Maintain long position with stoploss of 45,800. 480,000 are on the cards, but before that we expect prices to pull back as silver has run up from 44,000 to 47,300 so expect pullback till 45,900-45,800.

Brent crude has added 24 per cent since the start of the year. Crude oil rally has taken rest after superb December. Crude prices have posted gains for four successive weeks and have jumped an impressive 11.5% in December. Now it is facing resistance at $67.5, and we expect prices to pull back till $65-$64. The long position is highest in 15 months. Trend is positive but we may see some choppy movement as it is near to its resistance zone. The trend reversal will only come below 4200. Natural gas bears gain a stronger grip on the market after bulls lose cold weather support over the weekend. Upside potential remains limited with continued bearish weather headwinds.

Recommendation:

Buy Silver | TGT 48,500 | Stoploss 45,500

Silver has broken its recent swing high of 45700 and managed to sustain above it. It has given crossover of 20 and 50 EMA and price action is also above 5 EMA which clearly shows trend is positive. RSI_14 have moved back from overbought zone to 68 so there is a room on the upside. If Silver manages to overcome its recent hurdle of 47250, we may see levels till 48500 so buy with expected upmove till 48500 and stoploss of 45500 closing basis.

Buy Natural Gas | TGT 165 | Stoploss 150

Natural Gas is trading at a attractive valuation although the momentum on the upside may be limited at current juncture and we may see momentum on the upside coming after 6-7 days as weather forecast still shows mild winter in North America. Natural Gas is taking support in region of 154-153 and we feel it may consolidate around this region before starting its upward journey. Since it is trading around its support zone, risk/reward is favourable to be on long side so buy with expected move till 165 and stoploss of 150 closing basis.

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Disclaimer: The analyst is a Sr. Technical Analyst (Commodities) with Tradebulls Securities. Views expressed are his own.