Outlook on Commodities: MCX Gold August future in bearish trend

Jun 07 2014, 18:36 IST
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SummaryPrecious metal: Gold price rose slightly in Asia on Friday as a follow-on to ultra-loose monetary policy...

Precious metal: Gold price rose slightly in Asia on Friday as a follow-on to ultra-loose monetary policy by the European Central Bank overnight with the focus now on U.S. Data, expected to show a gain of 218,000 jobs. The European Central Bank cut its benchmark interest rate to a record-low 0.15% from the 0.25% rate held since November earlier in the day. We expect spot gold prices to trade on the positive note as the European Central Bank slashed its benchmark interest rates by 0.1 percent. Further, weakness in DX and expectation of decline in US Non-Farm Employment Change data may support prices to trade in positive way. However, upbeat global market sentiments may lead to the decline in demand for safe haven and expectations among the market participants that the US Federal Reserve may continue reducing its stimulus package at same pace may cap sharp upside in the prices.

Over all, MCX Gold August future is in bearish trend and we also saw good selling pressure in last week. So for the coming week, we are expecting little bid buying from the lower levels. For the coming week 25690/25250 will act as a major support whereas 26340/26560 will act as a major resistance level in MCX Gold August future. For the next week in MCX Gold, trader can use buy on lower level strategy, if MCX Gold August future sustains above the levels of 26000 then it could test the levels 26200/26340.

Technically, MCX Silver July futures is in consolidation and sustaining around lower levels. For the coming week 42800/44000 will act as major resistance levels where as 39000/37500 will act as major support in MCX Silver July futures. For the next week in MCX Silver futures, traders can use buy on lower level strategy, if MCX Silver July futures sustains above 40500 then it could test the levels of 41500/ 42800.

Energy: Crude oil prices were unchanged on Friday, as markets awaited the release of U.S. nonfarm payrolls data later in the day after last week's jobless claims came out higher than expected. Market participants were now eyeing U.S. nonfarm payrolls data to be released later in the day for further indications on the strength of the job market after recent employment reports fuelled investors' concerns. We expect crude oil prices to trade in range. Strong Economic data from China and ECB decision to cut its benchmark interest rates to boost economic growth fuelled the expectations among the investors that the demand for crude oil may go up.

For the coming week 5950/5700 will act as major supports levels whereas 6350/6500 will act as major resistance in MCX Crude oil June futures. For the next week, trader can use buy on lower level strategy, if MCX Crude June future sustain above 6112 levels then it could test the levels 6180/6339.

Base Metal: We expect base metal prices to trade on the mixed note as the expectation of weak economic data from US may add downside pressure on the prices. Further, uncertainty about the impact of an investigation into metal financing at Chinaís third-largest port and worries over LME warehouse court case may lead to the delay in outflows of stock in the market may prove as negative factors for the prices. Whereas, strong Economic data from Europe and China and ECB decision to cut interest rates to boost economic growth fuelled the expectations that the demand for base metal may in range bound.

Trend of MCX Copper June future is in consolidation and also sustaining on lower levels. For the coming week, it could face major resistance of 405/420 whereas 382/368 could be a major support in MCX Copper. For the next week trader may follow sell on higher levels strategy, if MCX Copper future sustain below 395 levels then it could test the level of 390/382.

By Vivek Gupta, Director Research, CapitalVia Global Research Limited

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