Commodity view by Bhavik Patel of Tradebulls Securities: Buy Gold, Copper

The Indian rupee has depreciated against US Dollar as the Dollar index is trading at four-month high and Asian currencies have been falling due to the spread of coronavirus. Chinese Yuan has traded above 7.00 mark for the past two consecutive trading sessions and for the sixth consecutive month. India’s exports fell 1.7 per cent in January 2020. Imports also saw a decline and for the tenth month in a row while the trade deficit came at seven-month high. All this have weakened Indian currency but the Reserve Bank of India (RBI) had bought aggressively near 71.10-20 levels to build up reserves and therefore there is a high possibility that the central bank will sell on any rise above 72.20-72.40 mark in order to book profit and also keep fiscal deficit in check.

Gold prices opened at $1,656 on Monday and then began a substantial, but short-lived rally, taking prices to $1,691.70. This spike occurred as the Dow Jones Industrial Average sold off sharply losing 1,031.61 points and closing at 27,960.80 on the fear that outbreak would turn into a pandemic. Gold continues to outperform US Treasury bonds despite a rising dollar index. On February 20, the yield on the US 10-year Treasury note slipped below the Fed’s benchmark interest rate, which was last seen at 1.59 per cent. The last time this phenomenon occurred was in last May when gold price launched a 3-month, 22 per cent rally as investors became exceedingly worried over the global growth outlook as well as a tightening Fed monetary policy. There is a high expectation that the US Fed will cut interest rate to cushion slowdown because of Coronavirus which is also positive for gold. We still believe gold is positive but overbought in short term so do not to take a fresh long position from here but let it come around to Rs 42,550 for fresh long positions.

The Silver market has broken above the top of the Bollinger Band indicator, showing that we are well above two standard deviations of the norm. That normally means that we are about to see a pullback. Ultimately, I do like buying pullbacks, but I also have to admit that a break above the $19.00 level would be extraordinarily bullish. I’m bullish, but I also need to find a good entry price below and 47,900 looks good enough levels for buying.

Fears that the rapidly spreading coronavirus outside of China could lead to a bigger than anticipated impact on the global economy is keeping a lid on crude oil prices. Current OPEC production is already at rock bottom. OPEC’s January 2020 production at 28.86 Mb/d is the lowest at least since March 2014 while production from Non-OPEC reaches a new high. I am not wildly bullish on the price of crude oil as it approaches $55 on NYMEX futures and $60 on Brent but I am not overly bearish of crude oil when it approaches $45 on NYMEX futures and $50 on Brent. Last week, the natural gas market experienced what could be a bounce of the dead cat variety. Five weeks to go until spring weakness in the natural gas futures arena. I am not bullish in Natural Gas and expect maximum upside till 140.

Buy Gold | TGT: Rs 43,800 | Stoploss: Rs 42,000

Gold is trading at an all-time high in MCX and prices have overstretched in the short term as RSI_14 is quoting at 74 and price action is far from all moving average. Today’s correction has given much needed pullback for gold prices to propel forward. We would like to wait till 42,300 for taking a long position for expected target till 43,800 and stoploss of 42,000 on a closing basis.

Buy Copper | TGT: Rs 432 | Stoploss: Rs 420

Copper has made a double bottom on the daily scale at 420.60. Meanwhile, 425 is an important support level and since copper after making double bottom is trading above its important support of 425, we expect the rally to continue till 432. One can take a long position near its support zone of 425 and expect upside movement till 432 and keep stoploss of 420 which is low of a double bottom.
Disclaimer: Bhavik Patel is a senior technical analyst (Commodities), Tradebulls Securities. He may/ may not hav positions in the commodities mentioned above.