Commodity outlook by Tradebulls Securities: Buy copper, silver

Commodity outlook and trading ideas by Bhavik Patel - Sr. Technical Analyst (Commodities), Tradebulls.

Indian rupee is not trading at its fair value around Rs 71/$ after Chinese Yuan hit the lowest point of 7 against USD. This has not been seen since 2008. Removal of Article 370 and weak Chinese Yuan has hit Indian rupee hard and our currency has depreciated rapidly. It seems RBI is not too keen and may intervene if volatility rises. On August 7, RBI announced 35 basis point rate cut and we expect Indian rupee to depreciate till 71.50-71.70 per US dollar. On the downside, 70.60 remains strong support.

Gold is trading at 6 years high in COMEX while in Indian rupee, Japanese Yen, Canadian and Australian Dollar, South African Rand, it is trading at all time high. The main driver behind gold’s upmove is escalating trade tensions between the US and China. After US President Donald Trump announced 10 per cent tariffs on the remaining $300 billion of Chinese imports, China let the yuan to weaken and rise above 7 against the US dollar for the first time in more than a decade. Technicals have turned bullish for gold and the next target in COMEX comes to $1520 and $1550. There are no current signals on the chart indicating short term top is near so we expect the ongoing bullish trend to continue. Silver will also continue to outperform and traders should not try to short them as the underlying trend is very bullish.

Crude oil has bounced from 7 week low but the trend still looks weak as investors are focusing on the demand side. With increasing trade war and weakening currency, it becomes expensive for India and China to import crude oil. This will affect demand and so the market is bearish on crude oil. Supply of crude continues to be stable and the market until now has ignored US inventory which has shown withdrawal since the past 6 weeks. Oil demand is in its peak season, but demand for OPEC oil remained below 30 million barrels per day in July. Strengthening US Dollar, emerging recession worries and accelerating EV sales are underlying reasons why oil prices are struggling to stay above $68 in Brent.

Recommendation:

Buy Copper | TGT 448 | Stoploss 435

Copper had made ‘piercing line’ candlestick formation around 432 which means temporary bottom has been placed. Negative fundamental news of US-China trade war had taken toll on copper prices but now it is reacting positively as we are seeing some short covering. RSI_14 has also recovered is now around 49.81. Above 50, RSI_14 will be in positive territory and we may see more upside in copper prices. Buy Copper at current level for expected upmove till 448 and maintain stoploss of 435 closing basis.

Buy Silver around 43100 | TGT 44000 | Stoploss 42400

Silver has outperformed gold and on the daily scale, there isn’t any reversal candlestick formation which is indicating short term top. Prices have increased too fast and the trend is positive so investors should not be in short position. We believe silver can retrace till 43100 where again it would be an ideal opportunity to go along with a target of 44000 and stoploss of 42400. So instead of chasing prices at a higher level, let silver settle around 43100 before taking long position.