Outlook & trading strategies for Gold, Natural Gas by Tradebulls Securities

The Indian rupee is trading near an all-time low despite the equity market showing strong upmove. Risk aversion is making investors flock to the safety of US Dollars and a sell-off is being seen in emerging market currencies. Lockdown is affecting the Indian economy and that is why our currency is depreciating. Until the lockdown is enforced, we don’t see any hope of recovery in our currency and the Indian rupee needs to come below 76 to stage any recovery. On the upside, the next target is 77.20-77.50 for the next week. Looking at how fast the Rupee depreciated, we may see the Reserve Bank of India (RBI) intervening soon around 77 levels so any long position near that vicinity should be cautious.

Spot Gold has retraced from $1,750 after trading at 7.5 years high from COMEX and from an all-time high in the domestic market which is a normal pullback in a strong uptrend rally. Economic shutdowns are leading to dollar weakness and gold price strength. Above $1,750, there is no technical resistance till $1,800. If we were to break down below the $1,670 level, then I would be a bit concerned with the overall uptrend. I expect gold prices to remain near the latest highs, however, and near-term price "corrections" should be short-lived. The real yield curve for US Treasury 10 yr and 5 yr is -0.53. So as long as the real interest rate remains negative, expect gold prices to remain high.

Silver is a mixed picture. While it is looking good on precious metal aspect there is a concern when it comes to industrial demand. Weak economic growth could impact silver prices and keep them contained in gold’s shadow. Silver is near the 78.6 per cent retracement taken from the high of 47,870 on March 6 to lows of 33,700 on March 18. Silver has nearly covered most of its March losses and so now we feel, it will take some time trading sideways. Above 45,000 we could see the next leg of rally till 46,500. The main trend will be under threat below 43,200.

WTI crude is trading near $20 level which has offered such a major amount of support previously. If we break down below there, we could probably see level till $18.50-$17.50 level rather quickly. We could see fading rallies more than anything else as demand has fallen off of a cliff. Investors are unconvinced that record supply cuts could soon balance markets pummelled by the coronavirus pandemic. The production cut will come in effect in May and global oil storage capacity is already more than 70 per cent filled, and more oil is pouring in every day. So we are likely to see a substantial overhang in the short-term. The physical Natural gas market remains very weak despite support from bullish weather. Heating demand has barely moved higher which is why we have seen a drop in natural gas prices.

Also, industrial demand is currently at 2 Bcf/d lower than last year due to the demand hit from coronavirus. Last week, I recommended to exit around 148-150 when it was trading at 145 for those who were holding long as that is where strong resistance is and NG needs to break above 150 for further upmove. Any long position should be exited below 139 was my recommendation last week. Now, once again, we may see Natural Gas come in the range of 119.50-117 where long position can be taken with the strict stoploss of 114 and target of 128.

Buy Gold around 45,800 | TGT: 47,500 | Stoploss: 44,500

Gold is trading at an all-time high and the rally has overextended in the short term. We believe short term traders might take profit and we could see gold correcting till 46,000-45,800 where fresh long positions can be taken with expected upmove till 47,500 and stoploss of 44,500. The rally is under threat only when gold breaks 44,500. On a daily scale, RSI_14 is at 73 which states overbought zone so it's better to wait for some pullback.

Buy Natural Gas at 118 | TGT: 128 | Stoploss: 114

Natural Gas is once again near its support zone of 118 where previously we have seen it make a base and bounce back. This time also, we expect Natural gas to take support in the region of 118-116 and bounce back. The recovery may not be sharp but in a slow staggered manner. There is no divergence on the daily scale and the trend still looks negative, so we would wait for NG to come around 118 before taking 'buy' initiative.

Disclaimer: The author is a Sr. Technical Analyst (Commodities) at Tradebulls Securities. Views are his own.