Commodity view by Bhavik Patel of Tradebulls Securities: Buy Gold, Copper

Commodities Outlook & Stock recommendation by Bhavik Patel - Sr. Technical Analyst (Commodities), Tradebulls Securities

Indian rupee continued to ignore higher consumer price index (CPI) based inflation while remaining upbeat on Indian Industrial Production (IIP) numbers, which rose for the first time in three months to 1.8 per cent. Some big announcement in the Budget and cool off in geopolitical crisis is keeping rupee strong. We expect the rupee to depreciate only after Budget as news are trickling in that this time the budget might be geared to kick start the economy. Tension in US and Iran has abated so emerging market currencies are rallying along with equity market as the market is in risk on mode. Expect rupee to test levels till Rs 70.60 before resuming back above Rs 71.20.

Gold: Once again the market is in risk on mode and global equities are trading at all time high so shine is coming off gold and silver. Gold managed to sustain above $1550 after correcting from $1650 to $1530. Once again the support of $1530 has been tested and respected. We are still bullish in precious metals inspite of risk on mode as equity market looks overstretched and gold bulls have managed to gain upper hand by keeping the levels of $1530 safe. Silver is expected to outperform in 2020 as it is the only precious metals in the last 2 years which is underperforming compared to gold, palladium and platinum. Any long positions should be booked profit as we might see some pullback and consolidation unless more conflict happens. Support comes at 45800 and 45000 while resistance comes at 46800 and 49500.

US crude imports spike on January 10 week to more than 7 mb/d. This will push up US crude storage back to more than 428 mbls by January 24. So expect US inventory to remain high for the next 2 weeks which will keep crude oil prices under pressure. The sharp pullback in tune to 7% - 10% has already come and now buyers are coming in. Oil prices have already shot up two weeks before due to the prospect of war, but no oil has actually been knocked offline. Crude oil is trading at a fair value so we don’t see too much correction from here on and next trigger would be March OPEC meet.

Recommendation:

Buy Copper | TGT: 462 | Stoploss: 446

Copper has given crossover of 20 and 50 EMA. RSI_14 is steady at 66 with no divergence and recent pull back from 453 to 446 was supported by 200 EMA. Copper is poised to test the resistance of 460 as, since August 2019, it has tested 3 times this level and fallen back. So given the historic pattern formation, we expect the current rally to atleast test till the levels of 460 and if it manages to close above that level, then the rally can get extended till 462-465. So buy at current levels for expected upmove till 462 and stoploss of 446 closing basis.

Buy Gold | TGT 40200 | Stoploss 39200

After a strong rally, gold has witnessed much needed pullback. RSI_14 which was in the overbought zone has now cooled off to 59 levels. Last couple of trading sessions has seen gold testing the support of 39260 and bouncing back. The levels also concur with 20 and 50 EMA giving creditable technical support. We recommend a long position from the current juncture with an expected target of 40200 and stoploss of 39200 closing basis.

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Disclaimer: The author may have positions in one or all of the above mentioned stocks. Views expressed are the author's own.