Gold and Silver saw sharp fall on Tuesday as market was caught by surprise after Treasury Secretary Janet Yellen conceded that interest rates may have to rise in order to contain inflation. These comments came after 48 hours where she downplayed rising inflation pressure thus creating confusion. The comments prompted US dollar to soar while precious metals saw sharp fall.
The way US economic recovery is gaining pace, market is now factoring that ultra loose monetary policy may not remain same in foreseeable future and interest rate rising may come next year. Physical demand in India has also taken hit after severe second wave of Covid with many states imposing restrictions and lockdown. Premium for physical gold has eroded and now is trading in discount of $2.
Gold also has headwinds in form of ETF outflows. We believe gold needs to break $1800 to gain upside momentum. In MCX, we continue to remain bullish until 46450 is not taken out. Next trigger for gold would be Friday’s US Non-Farm pay roll data which will give indication how strong US economy is recovering.
Silver bulls have taken breather around $27 after biggest run up in three months. Silver has benefited from the strong base metals move and has outperformed gold recently. Silver buyers may ignore the latest sluggish moves unless witnessing a clear break of the $25.60 horizontal line. Silver ETF continues to attract inflows as the global economy starts to normalize. While Gold ETF has shown outflows, Silver’s ETF are witnessing strong inflows. We predict silver prices to surge 22% this year, thanks to higher industrial demand. Rebound in industrial demand (electronics, autos, and solar power), will keep silver prices higher than in 2019.
Oil prices have hit 7-week high on demand optimism. Air travel is on the rise in the US and despite severe cases of Covid in India and Brazil, rest of world is coming out of the pandemic. Another reason for strong rally in Crude oil is because of estimated US crude oil falling more than expected. The rise in oil prices to nearly two-month highs has been supported by COVID-19 vaccine rollouts in the United States and Europe paving the way for pandemic lockdowns to be lifted and air travel to pick up. In MCX, strong support is around 4700 and next resistance is 5000. Buy on dips should be the strategy until 4700 is not breached on the downside.
Weather forecast is neutral for Natural Gas with mix of heating and cooling days. Notably, production was down slightly from last week and power burns ticked up to start the month of May. We continue to remain bullish in Natural gas with expected target of 225 and stoploss of 215. Any sharp selling is only expected below 210 levels.
Buy Crude | TGT 5,100 | Stop loss: 4,700
Crude oil is near to its 52 week high on MCX with prices trading well above its 20 and 50 DMA. RSI_14 is near 65 so there is room for higher price action. There is no divergence on RSI and chart shows strong upside price action. We recommend long near 4800 for expected target of 5100 and stoploss of 4700 closing basis.
Buy Zinc | TGT 240 | Stop loss 227
Zinc is trading near its 52 week high and RSI_14 is around 65. So there is room on the higher side and price action is taking support around its 20 DMA since 1st Apr. So any correction till 20 DMA i.e. around 232 would be ideal level to go long with expected target of 240 and stoploss of 227.
Disclaimer: Bhavik Patel is Sr. Technical Analyst (Currencies/Commodities) at Tradebulls Securities. Views are personal.