Cut exposure in Silver amid short-squeeze-driven volatility: Bhavik Patel

Currently, gold prices are under pressure as the metal is trading below 50 and 200 EMA. However, we are still bullish in the long-term as price risk remains upwards. The macro-environment remains supportive of higher prices in light of the weaker US dollar projections, negative real yields and more US stimulus. There are also higher chances of inflation coming this year which will be beneficial for gold prices. Moreover, retail demand has picked up and India has cut custom duty so there are chances of physical gold demand going up this year. Physical demand fell to a 11-year low in 2020. Central banks are expected to remain net buyers in 2021 despite official reserve demand tumbling to a 10-year low in 2020. Going forward, gold will continue to take price direction from the US dollar and real yields as the Federal Reserve remains dovish.

Silver has been choppy, swinging between $27to $29.70 in the last 4 trading session. Last time when we recommended to go long above $26 for target of $30, it almost got achieved. Now, volatility has increased and so we would recommend lowering any exposure in silver till sanity returns in the market. CME has raised margin for silver to push back any more speculative moves. 

Oil price has rallied and is comfortably above $54 as US lawmakers moved closer to approving President Joe Biden's $1.9 trillion Covid-19 aid bill without Republican support. Market was buoyed by the latest assessment by the OPEC+ that oil stock piles will decline to below a five-year average by June. This was their target as OPEC+ wanted to drive all the surplus oil by the end of 2021. OPEC is also compiling with production cut which is supporting prices despite weak demand. OPEC crude production increased for a seventh month in January after the group and its allies agreed to ease supply curbs further, but the growth was smaller than expected. We don't see any reversal in crude oil until 3,800 is breached on the downside. So keep holding long position and buy on declines with stoploss of 3,800 closing basis.

Natural Gas market shot higher this week as we have seen massive storm coming to the northeastern part of the United States. Prices have touched round psychological level of $3 but we are approaching the end of winter so there is no real reason to get excited about natural gas at this juncture. With that being the case, I think that what we are looking at is a potential for a nice selling opportunity as we head towards the warmer temperatures. 220-225 would be ideal level for shorting the natural gas with target of 200 and stoploss of 235.

Recommendation:

Sell Copper | TGT: 577 | Stoploss: 604

Copper prices are trading below 20 and 50 EMA and are on the cusp of giving sell cross over signal. RSI_14 is trading below 50 which suggests downward momentum. The recent swing of 590 has been breached on the lower side and so we expect the downside momentum to continue till 577. Traders should sell Copper near 596 for expected target of 577 and stoploss of 604 on a closing basis.

Sell Nickel below 1,270 | TGT: 1,240 | Stoploss: 1,295

Nickel has strong support around 1,270 as it bounced from that level recently. Clearly, bears will get upper hand below that level as 1,270 has been successfully defended by bulls. Recent emergence of 'Bearish Belt Hold' candlestick suggests bears are trying to gain control and we will have confirmation of a breakdown only below 1,270. So, we would recommend short position below 1,270 for an expected target of 1,240 and stoploss of 1,295 on a closing basis.

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