Trading strategies for copper and aluminum by Tradebulls Securities

The trend for aluminum has shifted from 'neutral' to 'positive'

Gold prices are trading at a 2-month low as US consumer confidence index came in better-than-expected in June and is now at pre-pandemic levels. Gold prices remain under strong pressure as market participants are active sellers as yields for government debt instruments have seen an increase. Increased yields, along with dollar strength, were the contributing factors for lower pricing in gold on Tuesday. Higher short-term inflation expectations are not impacting the consumer mindset just yet.

This week's two main headwinds are a stronger US dollar and higher US Treasury yields in the marketplace that is not seeing a lot of risk aversion. This is a good time for the dollar because the US is seen as the best place to be during the pandemic due to its quick vaccine rollout. Right now, gold bears have near term technical advantage as it managed to breach its support level of 46,600 in the MCX. The key to the future direction of gold will be Friday’s jobs report by the US labor department, and if the data comes higher than expected, expect more selling pressure in gold. Rs 47,100 continues to remain hurdle for gold on higher side while now support has shifted from Rs 46,600 to Rs 46,000. We don’t expect any strong rebound in gold before Friday’s US NFP data.

Silver bears have near-term technical advantage as silver managed to break Rs 68,000 but recovered back above its support. Still, the breach of the support level suggests trend is weak and buyers are unwilling to provide support aggressively. Large precious metals speculators sharply decreased their net long positions in the Silver futures markets last week. Speculators decreased their net short dollar positions in the latest week meaning US dollar is expected to trade stronger which will put pressure on silver prices. Any long position can only be taken above Rs 70,000 and Rs 67,700 as well as Rs 66,000 will remain as the supports for silver.

Crude oil prices, which fell on Monday, on news of increased production from OPEC+, have started rallying back after the US oil inventories fell for the sixth straight week. OPEC's forecasts point to an oil supply deficit in August and in the rest of 2021 as economies recover from the pandemic, suggesting OPEC+ has room to raise output. OPEC+ meeting will be on Thursday and market expect atleast 5,00,000 bpd increase in production. US shale producers are in no mood to increase output and retaining discipline, we don’t expect any significant correction in crude oil prices and advocate buy on dips strategy.

Natural Gas prices have continued to see strong upmove due to strond demand because of record heat wave in US. This long weekend, high temperatures are expected to continue so we will not be shorting the market but wait for any reversal signal in chart before taking any short positions.

Recommendations
 

Buy Copper July above 730 | TGT: 755 | Stoploss: 718

Last week, we recommended short position in Copper below 730 as it was the support level and copper fell till 685 and our target was achieved. Now, copper is on the path of recovery and the same support has become resistance. So, we would recommend taking long position above its resistance level of 730 for the expected target of 755 and stoploss at 718.

Buy Aluminum July around 196 | TGT: 204 | Stoploss: 191

We also recommended Aluminum going short below 188 last week but the price did not breach that level and has bounced back. So, the support still remains valid and now its resistance of 198 has been breached. So, the trend has again shifted from neutral to positive and so we would recommend going long near 196 for expected target of 204 and stoploss of 191 on a closing basis.
Disclaimer: Bhavik Patel is Senior Commodity/Currency Research Analyst at TradeBulls Securities.Views are personal.