Trading Strategies for Brent Crude and Zinc by Tradebulls Securities
Gold and Money fell sharply on Tuesday as the market was taken by surprise after Treasury Secretary Janet Yellen admitted interest rates may have to rise in order to contain inflation. These comments came after 48 hours where she played down increasing inflationary pressure, creating confusion. The comments prompted the US dollar to soar as precious metals fell sharply.
Given how the US economic recovery is accelerating, the market is now taking into account the fact that ultra-loose monetary policy may not stay the same for the foreseeable future and that higher interest rates may occur the next year. Physical demand in India has also been hit after the severe second wave of Covid, with many states imposing restrictions and a lockdown. The premium for physical gold has eroded and is now trading at a discount of $ 2.
Gold also has headwinds in the form of ETF exits. We believe gold needs to cross $ 1,800 to gain traction. In MCX we remain bullish until 46450 is not removed. The next trigger for gold would be US non-farm wage data on Friday, which will give an indication of the strength of the recovering US economy.
Silver bulls caught their breath around $ 27 after the biggest rise in three months. Silver benefited from the strong movement in base metals and recently outperformed gold. Silver buyers may ignore the latest slow moves unless they see a sharp break out of the horizontal line of $ 25.60. The Silver ETF continues to attract capital flows as the global economy begins to normalize. While the Gold ETF has seen exits, the Silver ETF has seen strong inflows. We expect silver prices to rise 22% this year, driven by higher industrial demand. The rebound in industrial demand (electronics, automobiles and solar power) will keep silver prices higher than in 2019.
Oil prices hit a 7-week high on optimistic demand. Air travel is on the rise in the United States and despite severe cases of Covid in India and Brazil, the rest of the world is emerging from the pandemic. Another reason for the strong recovery in crude oil is the fall in US crude oil estimated to be more than expected. Rising oil prices to nearly two-month highs have been supported by the rollout of the COVID-19 vaccine in the United States and Europe, paving the way for the lifting of pandemic lockdowns and the resumption of air travel . In MCX, strong support is around 4700 and the next resistance is 5000. Buying troughs should be the strategy until 4700 is not breached on the downside.
The weather forecast is neutral for Natural gas with a mixture of heating and cooling days. In particular, production fell slightly compared to last week and electricity consumption increased to start the month of May. We remain bullish on Natural Gas with an expected target of 225 and a stop loss of 215. Any large sells are only expected below the 210 levels.
Buying rough | TGT 5 100 | Stop loss: 4,700
Crude Oil is near its 52 week high on the MCX with prices 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 the RSI and the chart shows strong bullish price action. We recommend a long position near 4800 for an expected target of 5100 and a stoploss of 4700 at 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 to the upside and price action is taking support around its 20 DMA since April 1. So any correction up to 20 DMA, i.e. around 232 would be the ideal level to be long with an expected target of 240 and a stoploss of 227.
Disclaimer: Bhavik Patel is Senior Technical Analyst (Currencies / Commodities) at Tradebulls Securities. Opinions are personal.