Outlook & trading strategies for Copper, Gold by Tradebulls Securities

ADX is showing momentum on the upside for Gold

Indian Rupee is trading at an all-time low after the US Dollar index breached 103 on safe haven buying. The lockdown because of coronavirus will affect Indian economy badly and our equity market is the second-most corrected market in the world after Brazil. So, the Indian currency is feeling the heat and that is why we have seen swift depreciation of the rupee. The Reserve Bank of India (RBI) has been trying to intervene and has sold nearly $3 billion in Forex Market to curb volatility but we feel, going ahead, until the market recovers, we may see Indian rupee remain under pressure.

Gold this week saw stellar rally wherein two trading session saw a boost of nearly $100 after US Fed unveiled massive stimulus and unconfirmed reports that London spot gold price quotes have become unreliable. This prompted European big traders and commercials to go for long position in COMEX futures. Gold usually trades higher on fear factors and now that US Dollar index is retracing we are seeing a fresh surge in gold. Silver, on the other hand, is underperforming as it is an industrial metal but after being in such oversold region, we expect silver also to gain on the back of gold’s rush.

Lockdown and travel ban has hurt crude oil demand prospects. At its peak, oil demand could slump by 15 to 20 million bpd over the next few weeks. There is close to 750 million barrel of crude oil inventory both in onshore and offshore which would increase to 1 billion in the next few weeks. After March 31, OPEC and Non-OPEC would increase production so the world will have more oil than it can consume. All of the bad news has been factored in by the market and we don’t expect Brent to trade or sustain below $23. We believe going forward crude will trade in a range of $26-$34.

Buy Gold: TGT: 43,500 | Stoploss: 40,800

Gold, after taking support at its 200 DMA on the daily chart, has recovered smartly. RSI_14 is above 51 so the trend is bullish. Gold on the daily scale is trading above 50 DMA and near its 20 DMA. ADX is showing momentum on the upside so we expect the prices to test till 43,500. We recommend a long position near 42,000 in June future for the target of 43,500 and stoploss of 40,800

Buy Copper: TGT: 388 | Stoploss: 360

Copper, after trading in the oversold zone, has recovered as RSI_14 has bounced to 27 from 15. It is still in the oversold region but the ADX has shown buy signal. Prices, which were far from its short term moving average, need to trade near the moving average for mean reversion to take place. We recommend buy in April future around 368 for the target of 388 and stoploss of 360.
Disclaimer: The author is a Sr. Technical Analyst (Commodities) at Tradebulls Securities. Views are his own.