Gold immune to US Prez election, stimulus package key trigger: Bhavik Patel

After a record run, we're going through a normal and healthy period of consolidation in the monetary metals space, especially in Gold and Silver. We would advice investors to keep position light if traders have short term outlook because of Nov 3 election. We don't believe Gold will react that much as to who will win US presidential election but economic stimulus is key for gold prices to move higher. Gold seems to be trading in narrow range at the moment, responding to small moves in the US dollar which is responding to small moves in the possible political outcome of the election. But rising coronavirus cases, especially in Europe, are keeping gold supported, more so because of the possible economic fallout. Gold needs to break $1,930 for upside momentum. Support comes around $1,890 and $1,880. Gold has ample support in area of 50000-50400 and resistance around 51200-51400.

Silver has already broken below its rising short-term support line and the corrective upswing might already be over. If we look at the monthly silver volume levels, it seems likely that the next sizable downswing has already begun looking at the high volume during the peak of 2011 and same high volume in monthly chart in 2020. The long term trend might be bullish but we are neutral in short term. In the short-term time frame, silver is making lower high and lower low indicating weak trend. We would be slightly bullish above 62600 while 61500 and 61200 will be immediate support.

Brent crude is likely to trade in range of $36-$42 until Nov 3 election. Tuesday's rally stalled on larger than expected build up of crude oil prices. Ramp up of oil production in Libya will be headwinds for crude oil. Bullish factors include another storm in the US Gulf Coast that is shutting down oil production. The increase in the number of new Covid-19 cases serves as a chronic bearish undertone in the market. Despite the drop off in US Shale production, US crude oil inventories are still 10 per cent above the five-year average. The good news is OPEC+ might extend the production cuts that it did in the summer to 2021. In MCX, 2750 and 2700 is the immediate support while 2900 is immediate resistance.

Tide has turned for Natural Gas and we believe this winter season we will see higher prices. The early November weather forecast is bearish so we are seeing prices consolidate but the physical market has really tightened up in the last few days. The current production is expected to keep declining into year end which will be good setup for Natural Gas prices. So 2020/2021 winter will be opposite of what we saw in 2019/2020. Last year, we were oversupplied by 3-4 Bcf/d, while this year, we will be undersupplied by 5+ Bcf/d. This large difference means that even if the weather outlook was just normal, the price reaction will be bullish. We might see prices rocketing above 250 while NG has made solid base around 226.

Recommendations;

Sell Crude Oil | TGT: 2750 | Stop loss: 2940

Crude oil has given 20 and 50 EMA cross below on daily scale. Momentum oscillator ADX has also confirmed the bearish sentiment and RSI_14 is trading around 42, another testament of weakening momentum. After trading in range of 3000-2850, we are seeing breakdown in crude oil prices so we recommend sell at current level with expected target of 2750 and stoploss of 2940.

Buy Lead | TGT: 151 | Stop loss: 147.20

Lead had made ‘bullish belt hold’ candlestick pattern on daily scale. Momentum oscillator RSI_14 is above 50 while ADX is signaling that we may enter into bull trend. Moving averages are neutral at the moment and lead which had been underperforming compared to Zinc might catch up this week so we recommend buy with expected target of 151 and stoploss of 147.20

=====================================

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