Trading strategies for gold and aluminum by Tradebulls Securities

In gold, fresh selling can commence below 46,800 levels while buying can commence above 47,300.

Gold, which lost around $70 last week, managed to recover after the US Fed stated that inflation might be there till the year-end and participants are expecting that due to high inflation, the Fed wont have room on the upside once it starts increasing rates. This propelled equity market and bullions to do a 180 degree turn. Although gold’s reaction is muted compared to equity class, atleast for the time being, gold selling pressure has abated. This week, we expect gold prices to remain in the range of 46,800-47,300. We are neutral in gold and fresh selling can commence below 46,800 levels while buying can commence above 47,300.

Silver prices have recovered but lack follow through. Prices have pulled back from 2-month low, but in order to clear its 3-day high of 68,200. Just like gold, silver is now consolidating after last week's sell-off and although in the short term, selling has abated, unless 68,500 is not taken out in MCX, we are not convinced about going long. if the downside bias resumes, a retest of the two-month lows will be well on the cards. The $25 round figure in COMEX will be on the sellers’ radars. On the downside, below 66,500, we may see next support coming around 65,000, so we remain neutral and wait for further clear directions before taking any fresh positions.

Crude oil prices continues to rally amid stalled talks between Iran and the United States. Ongoing vaccination rollouts across major economies are also helping to strengthen the growth rebound narrative. Overall, oil markets will likely continue trending higher as the near-term supply outlook is not seen rising in a commensurate fashion alongside demand. Even if there is deal between the US and Iran, returning Iranian oil to the global market is not easy and may take months. Even after that, Iran’s output would constitutes less than 5 per cent of the total global supply. Despite $73 oil, US shale producers are not expected to significantly raise crude production this year as they continue to be focused on disciplined capital expenditures and returning more cash to investors. This will cap supply of oil and increasing demand means Brent crude will soon see $80 levels and above. So buy on dips in crude and we expect prices to touch 5,500-5,600 in MCX.

Natural Gas prices settled in positive territory yesterday on expectations that increase in global gas prices would boost US liquefied natural gas (LNG) exports. Speculators have increased their long positions by most since Jun 2020. Technically, the market is under short covering as the market has witnessed a drop in open interest by -8.67 per cent. I would recommend keeping position size somewhat small and this is a time of year that typically natural gas struggles a bit. But there is positive factor as there is tropical storms in the Gulf of Mexico, so that could provide a little bit of a short-term boost regardless.

Recommendations

Buy Gold Aug above 47,300 | TGT: 48,000 | Stoploss: 46,850

Gold futures had made ‘Bearish belt hold’ candlestick format last week when the US Fed changed its outlook. Follow up candles have been negative, but prices are now starting to consolidate. Recent high after bearish belt hold candlestick is 47,300 and gold is struggling to gain any traction above that level. So, clearly sellers are defending that level and once that level is breached, we might see short covering. Looking at this scenario, we would recommend going long only above 47,300 for expected move till 48,000 and stoploss of 46,850 on a closing basis.

Sell Aluminum July below 190 | TGT: 184 | Stoploss: 195

Since June 3, Aluminum July contract has taken multiple supports around 190.40 and bounced back. Clearly, buyers are defending this level and a breach below that would see long unwinding. RSI_14 is showing loss of momentum as it is struggling to sustain above the 50 levels, so we would recommend going short below 190 levels for expected down side move till 184 and stoploss of 195.

Disclaimer: Bhavik Patel is Senior Commodity/Currency Research Analyst at TradeBulls Securities.Views are personal.