Copper and Aluminum Trading Strategies by Tradebulls Securities
Gold prices are trading at a two-month low as the US consumer confidence index was better than expected in June and now sits at pre-pandemic levels. Gold prices remain under great pressure as market participants are active sellers as yields on government debt instruments have increased. Rising yields, along with the strength of the dollar, were the factors that helped push gold prices down on Tuesday. Higher short-term inflation expectations are not yet having an impact on the mindset of consumers.
The two main headwinds this week are a stronger US dollar and higher US Treasury yields in the market which doesn’t see much risk aversion. It’s a good time for the dollar as the United States is considered the best place to be during the pandemic due to its rapid roll-out of its vaccines. Right now, Gold Bears have a short term technical advantage as they managed to break through its 46,600 support level in the MCX. Key to gold’s future direction will be Friday’s US Department of Labor employment report, and if the data is higher than expected, expect more selling pressure on gold. . Rs 47,100 continues to remain an obstacle for gold on the upper side as now support has risen from Rs 46,600 to Rs 46,000. We do not expect a strong rebound in gold until US NFP data Friday.
Silver bears have a short term technical advantage as silver managed to break Rs 68,000 but came back above support. Nonetheless, the break in the support level suggests that the trend is weak and that the buyers are unwilling to provide support aggressively. Major precious metals speculators sharply reduced their net long positions in the silver futures markets last week. Speculators have reduced their net short positions in the dollar over the past week, which means the US dollar is expected to trade stronger, which will put pressure on silver prices. Any long position can only be taken above Rs 70,000 and Rs 67,700 as well as Rs 66,000 will remain the supports of the money.
Crude oil Prices, which fell on Monday following news of an OPEC + production increase, began to recover after US oil inventories fell for the sixth week in a row. OPEC forecasts point to an oil supply shortfall in August and the rest of 2021 as economies recover from the pandemic, suggesting that OPEC + has an opportunity to increase production. The OPEC + meeting will take place on Thursday and the market expects a production increase of at least 5,000,000 bpd. US shale producers are not in the mood to increase production and maintain discipline, we do not anticipate a significant correction in crude oil prices and advocate a buy strategy if it falls.
Natural gas prices continued to rise sharply due to strong demand due to the record heat wave in the United States. This long weekend, high temperatures are expected to continue so we will not sell the market but wait for any reversal signal in the chart before taking short positions.
Buy July copper above 730 | TGT: 755 | Stoploss: 718
Last week we recommended a short position on copper below 730 as that was the support level and copper fell to 685 and our target was met. Now copper is on the road to recovery and the same support has turned into resistance. We therefore recommend that you take a long position above its resistance level of 730 for the expected target of 755 and a stoploss at 718.
Buy Aluminum July around 196 | TGT: 204 | Stoploss: 191
We also recommended aluminum to be short below 188 last week, but the price didn’t go above that level and rebounded. Thus, the support still remains valid and now its resistance of 198 has been broken. So the trend has shifted from neutral to positive again and therefore we recommend going long near 196 for an expected target of 204 and a stoploss of 191 on a close basis.
Disclaimer: Bhavik Patel is Senior Research Analyst, Commodities and Currencies at TradeBulls Securities. Opinions are personal.