Gold has managed to stay above Rs 7,285 levels, which I had advocated as a retracement support. The closing has been convincingly higher than Rs 7,400 levels.
Last week was an unexciting one for the commodities markets as the volatility seen in the week preceding it was conspicuous by it’s absence. The week-on-week movement was nothing to write home about.
Precious metals consolidated as frayed nerves ensured little or no aggression in the trading pattern, which had been the hallmark of recent weeks.
Crude ended the week with minuscule gains as the players waited for weather conditions to change before initiating fresh trades in either direction. Agri-commodities witnessed action by default as players shifted focus to this segment.
Agri commodities: Chana witnessed a short squeeze as players covered short positions ahead of the December series expiry. That done, the commodity ended the week on a sombre note. A fall below the the 1907 levels will see weakness emerging on the counter. Traders are advised to remain cautious on this volatile counter and avoid fresh long positions.
Jeera remains rather placid and is showing no hurry to move higher. Mentha oil continues its dream run as the harsh winter ensures higher offtake. Traders are cautioned to avoid temptation and refrain from shorting the counter at this juncture.
The cost of carry between the current, mid and far month itself signals a buying momentum that cannot be wished away in the near term. Kapas April contracts are continuing to trade near Rs 370 levels, which will be the threshold above which the outlook will remain firm.
The support base remains at Rs 357, which will mark a turning point towards bearishness if the said level is violated on a consistent closing basis with higher volumes.
Metals: Copper has managed to crawl above the Rs 200 mark after a brief slide, thanks to short-covering and minor fresh buying. The Rs 207 mark remains a resistance level this week and upsides will meet with selling pressure as short-term bulls lock in gains.
Only a sustained gain above Rs 209 will see the commodity gain upward momentum afresh. Gold has managed to stay above Rs 7,285 levels, which I had advocated as a retracement support. The closing has been convincingly higher than Rs 7,400 levels.
The upsides may see Rs 7,520-7,540 levels being achieved with relative ease if the current momentum continues. Falls are likely to be cushioned by short covering and fresh buying. The outlook is that of buying on declines of over 1-1.50 % and nursing long positions.
For silver, I would advocate a similar outlook on silver with a buy recommendationon losses of over 1-1.50 %. All fresh trades must be initiated on small exposure levels only.
Energy: Crude remains rangebound as the Rs 2,600 levels are yet to be violated to signal a weakness on the short-term horizon.
Upsides are continuing to remain capped as winter is eluding the bulls on this counter. The bad news for the bulls on this commodity is that the last fortnight ahead of expiry witnesses a yawning difference between the near and mid month series, thereby forcing bulls to pay a high cost of carry on long positions.
The Rs 2,764 levels are a level to watch for the January series. Only once the commodity trades consistently above this threshold, will the outlook turn bullish. Till then, I advocate abstinence from fresh agressive buying.
Till then, have a profitable week ahead and a very happy and prosperous new year.
(The author is a Mumbai-based investment consultant and invites feedback at vijay@BSPLindia.com )
Mandatory disclosure: The analyst has open positions in the MCX crude contracts mentioned above.
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