Commodity strategies: Gold and silver

By Ravindra Rao

Gold futures closed higher late in the session on Friday, registering its third weekly gain. An inside move candlestick pattern has been formed, suggesting indecision amid high volatility. Meanwhile, MCX Gold’s 20-day EMA holds as the key support for the day (Rs 47,570), followed by Rs 47,350. Similarly, Rs 48,300-48,400 zone holds key resistance. On the momentum front, the gain in RSI above 50 has reserved bullish hopes in the trend. So for the day price is expected to trade in the range of Rs 47,570-48,400 with a sideways to positive bias. Only a sustained move below Rs 47,350 would negate the bullishness in price and it would slip towards Rs 47,000.

Strategy: Buy MCX Gold Aug at Rs 47,700. Target: Rs 48,250. Stop loss: Rs 47,350

MCX Silver futures closed on a higher note on Friday but was unable to breach its key resistance of 20-day EMA at Rs 69,480. Meanwhile, the metal has formed a bullish engulfing pattern near the intermediate rising trend line support, which could limit the downside. However, the price has to breach the top of the pattern (Rs 69,700) to confirm the reversal in trend, which would push it towards Rs 70,250, followed by Rs 71,200. On the other hand, a close below Rs 68,200 would negate the pattern and in that case it would slip towards the key support of Rs 67,800 (61.8% Fibonacci level). The strength index RSI is supporting a sideways trend as it continues to hover near the 50 mark (48). For the day, the price is likely to move in the range of Rs 68,200-70,250 with a sideways bias. Only a close below Rs 68,200 would extend the weakness towards Rs 67,800.

Trading Range: Rs 68,200-70,250

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