In general, bullion rally has shown signs of stalling since August with a resilient USD and concern over whether the US will push through additional stimulus. The level of $1905 is breached which was acting as good support for gold. Next support of $1869 has also been breached so we may be looking at $1819. Break below $1905 confirmed downside break of descending triangle pattern on daily scale.
US Dollar has climbed to near two month peak on reports of UK and Spain looming second lockdown on rising infection. US Fed stated that path ahead for the economy remains uncertain and the US central bank will do more if needed which propelled US dollar up. Historically dollar also rallies around the time of US elections. Since 1980, the USDX rose 7 of 10 times between the start of September and early December, gaining an average of 2.5%. For now, the gold bull market is just taking a breather. But it's certainly far from over.
Silver has witnessed more breakdown compared to gold as fresh lockdown will affect silver as base metal more. Also, return of silver from March till early September was more, so it is correcting more too. Silver volatility is trading at 49, sitting far from the monthly high (60.37) and near to monthly low (42.89). Since 1st Sept, Silver volatility is decreasing. Despite sharp fall in silver prices, silver volatility has jumped just from 43 to 49. Silver is in weak territory as it has breached $26 and now next support comes at $22. Silver has breached its 50% retracement taken at 46743 to 77949 and now is resting at 38.2% (58650). Breach below that level could propel silver towards 54100. Silver needs to breach 62350 (50%) for trend to reverse.
Oil market remained resilient as OPEC+ continue to give support. OPEC+ would take a pro-active and pre-emptive stance in addressing oil market challenges and OPEC+ could hold an extraordinary meeting in October if the oil market soured because of weak demand and rising coronavirus cases. We don’t expect too much upside but downside is also limited as speculators holding long positions are not that much. In Libya, the National Oil Company expects oil output to rise to more than a quarter of a million barrels per day (bpd) by next week which is bad for crude oil but market has anticipated higher output and lower demand due to new wave of infection from covid. In short term, we expect prices to remain under pressure.
Gravity hit the natural gas market in September as Natural Gas has broken $2 level but in relative short period, Natural Gas jumped 22%. Injections have been rising over the past two weeks. Only nine weeks to go until the 2020/2021 withdrawal season. The latest inventory data from the Energy Information Administration was a reminder that there is plenty of natural gas in storage to meet requirements even if the winter of 2020/2021 is colder than the average. The prices have shot up from oversold territory and so now it is good opportunity to go for short once again.
Sell Natural Gas below 162 | TGT: 154 | Stop loss: 168
Natural Gas has jumped by nearly 22% in just 2 trading session so short term chances of pullback are higher. Natural Gas hit 171.60 in MCX and Natural Gas has resistance around the range of 172-176. So we expect pullback in prices and acceleration in downside will commence if Natural Gas breaches 162. So we are advising short below the recommended level for target of 154 and stoploss of 168
Sell Lead | TGT: 143 | Stop loss: 150
Lead has been making lower low and lower high on daily scale indicating bearish trend. On weekly scale, Lead has made ‘ Bearish Belt Hold’ candlestick pattern confirming bearish trend on weekly scale. The confirmation of bearish sentiment in short term has also been triggered by cross below of 20 and 50 DMA on daily scale. Prices are near to 200 DMA which should act as support and the level comes around 143-142. So we recommend short position in Lead with expected target of 143 and stoploss of 150.
Disclaimer: Bhavik Patel is Sr. Technical Analyst (Commodities) at Tradebulls Securities. Views are personal.