Near-term gains in gold, silver limited amid dollar strength: Bhavik Patel

Gold will trade in range until market gets more clarity on the new Joe Biden-administration's policies

Gold market once again remained caught in a tug of war between expectations of an improving economy and rising inflation pressures as Joe Biden took office. Hopes of a massive stimulus bolstered the prospects for precious metals. Janet Yellen said that tax cut in 2017 for large corporation should be repelled, helping gold/silver to rally. Gold has resistance around $1,865 and needs to break that level for momentum to take it above $1,900. $1,820-$1,810 is the immediate support and we believe gold will trade in range until market gets more clarity on the new administration's policies.

Silver rallied along with gold after Yellen urged lawmakers to "act big" on coronavirus relief spending, adding that the benefits outweigh the expenses of a higher debt burden. In the near term, gains in gold and silver will be limited due to higher yields and some dollar strength. The price gain suggests bears are exhausted and signals that near-term market bottom is in place. Silver bulls next upside price objective is to close the price above $29 which was January high while support is emerging at $25 and $24.36.

Oil is steadily climbing despite lockdown in Europe and virus mutating as the US stimulus hopes is giving bulls ammunition to outclass bears. The market remains concerned about near-term oil demand as the International Energy Agency cut its outlook for first-quarter oil demand by 580,000 barrels per day. This, however, didn't deter bulls as OPEC is expected to keep production in check after IEA's forecast of reduction in global demand. Oil has been resilent despite rising Covid-19 cases as it is rallying on the optimism of vaccine inoculation. As long as 3,800 is not breached, we would recommend to stay long in Crude oil in MCX.

If the latest weather forecast remains unchanged, total natural gas demand in the US will edge down by 0.7 bcf/d YoY over the next two weeks. The longs got liquidated after bearish weather was predicted this weekend. Natural Gas needs to close above 191 for the upside momentum to start. Next support is in vicinity of 183-180. We would recommend long only above 190 closing basis.

Recommendation:

Buy Gold | TGT: 50,000 | Stop loss: 48,300

Gold had made 'Harami' Candlestick pattern after sharp fall from 51,800 to 48,680. Recently, prices have steadily climbed showing immediate base has been made. There is no divergence on RSI_14 on daily scale so we recommend going long with expected target of 50,000 and stop loss of 48,300 closing basis.

Buy Zinc | TGT:  222 |Stop loss: 213

Zinc has a strong support around 213-212 as it has bounced back from these levels thrice. 50 EMA is also proving to be a strong support as prices have failed to breach and sustain below showing strength in the commodity. RSI_14 is near to 50 and once it sustains above 50, we can see upside momentum accelerating. So buy at current level with expected target of 222 and stoploss of 213 on a closing basis.

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