Trading strategies for gold and zinc by Tradebulls Securities

Gold

Gold futures closed fractionally higher on Tuesday on the back of US dollar weakness. Gold sentiment had clearly soured as gold saw first quarterly drop in more than two years. Gold rebounded from nine-month low on Friday as the US dollar started retracing back after unveiling of President Joe Biden's $2.25 trillion stimulus plan that would be paid for by a corporate tax increase. In hindsight, gold prices have held up relative well despite the bearish sentiment as it has again moved above $1,700 in COMEX. From a contrarian point of view, gold has pretty nice set-up as nobody wants to hold gold anymore. Although, rise in Covid-19 cases has created some bump but the world economy is on the path of recovery and so we believe gold is close to bottom as nobody is interested in holding gold anymore. Gold has shown resilient strength despite negative headlines and strong headwinds like jump in US bond yields, record equity market valuation and improving economy. We believe the recent low of 44,200 in MCX is short-term bottom and gold is expected to trade steadily higher from here on. Buy on dips strategy should be used and we expect gold to test 46,500-46,500 in a week.

Silver

Silvers' near-term technical outlook has changed recently after weakening of the US Dollar. Silver bulls next upside price objective is closing prices above technical resistance at $26 an ounce. Good thing is that silver has recaptured $25 mark and now should be eyeing for $26. US bond yields and US Dollar are on backfoot and given silver’s historically negative correlation to both USD and bond yields, we expect silver to propel further up towards Rs.66,900. Now, support for the silver comes at 64,800 in MCX.

Crude oil

Crude oil is trying to find some footing after sharp fall as as rising supply from OPEC+ and higher Iranian output countered signs of a strong economic rebound in the United States. Now, there is another wild card in form of Iran returning to market. Although the sanctions on Iran will only be lifted after talks are concluded so in near term, Iran returning to market will not be concerned for the market. Crude needs to break 4,500 for upward momentum and is stuck in range of 4,300-4,500.

Natural Gas

We continue to see more bearish pressure as it is likely that the natural gas markets will suffer due to the lack of demand as we go into warmer temperatures. The oversupply and lack of demand makes for a perfect selling opportunity every time it rallies.  Any bounce till 188 would be perfect setup for shorting Natural Gas. Warmer than normal weather is expected to cover most of the United States for the next 6-10 and 8-14 days according to the National Oceanic Atmospheric Administration so don’t get trapped in buying on declines but maintain strategy of sell on rise.

Recommendations
 

Buy Zinc | TGT: 232 | Stoploss: 218

Zinc has broken out from the range of 222-217 with volumes. Range breakout along with volume confirms bullish breakout. RSI is above 50 and moving average of 20 and 50 also has given buy crossover, so, we are bullish in Zinc and recommending long position with target of 232 and stoploss of 218.

Buy Gold around 45,800 | TGT: 46,800 | Stoploss: 45,500

Gold has made double bottom around 44,150 and bounced back sharply. In COMEX, it has scaled back above $1,700 and in MCX, prices have breached its 50-DMA, confirming the ongoing bullish trend. There is no divergence in RSI on daily scale with RSI trading around 60. We recommend long positions near 45,800 with expected target of 46,800 and stoploss of 45,500.

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