Commodity strategies: Gold, silver

Ravindra Rao

MCX Gold futures reversed lower after hitting the key resistance zone at Rs 48,000 last week. Price found support at its 8-day EMA at Rs 47,200, which has limited the downside. The next key support holds around Rs 46,900 (20-DEMA). The bullish crossover of 8- and 20-day EMA has also limited the downside. Now as per the oscillators, the price has moved out of the oversold zone and is placed above the neutral zone, which supports sideways to higher momentum. The medium-term momentum has turned positive as the MACD index has generated a crossover buy signal. The MACD histogram is in the positive territory but the upward sloping trajectory is decelerating, which points to consolidation. To conclude, price is likely to consolidate in the wide range of Rs 46,900-47,700 with a sideways bias. Only a close below Rs 46,900 would extend the weakness towards Rs 46,600-46,500 zone. On the flipside, a move above Rs 47,700 might take the price again towards Rs 48,000.

Trading Range: Rs 46,900-47,700

MCX Silver prices remained in a sideways range after breaching the higher band of regression channel and 20-day EMA resistance at Rs 62,200. Meanwhile, the price formed a higher high and lower low formation which is a sign of a bullish momentum. Price has also moved above the 50-day EMA at Rs 63,100, which has supported the bullish bets. However, it has to sustain above the 50-day EMA to move towards the next target resistance at its 200-day EMA at Rs 65,000. On the oscillator front, fast stochastic has generated a reversal signal in overbought territory, indicating a possible profit booking. However a strong RSI, which is at 63, is supporting the bulls. From the above analysis, we expect the price to trade in the range of Rs 62,200-64,200 with a sideways to higher bias. A close above Rs 64,200 may intensify the bullish momentum towards Rs 65,000.

Trading Range: Rs 62,200-64,200

(Ravindra Rao is CMT, EPAT, VP-Head Commodity Research, Kotak Securities Ltd. Views are his own)