Bullion, Crude and Currency Outlook 24-2-2022

BULLION

Gold and silver extended their fall last week with the yellow metal prices slipping to nearly two month lows and silver falling to 3.5 month lows in the international markets. Gold and silver extended its fall after strong gains in the dollar index, which surged to two month highs and crossed the 105 mark. The U.S. 10-year bond yields also crossed 3.90% levels amid further aggressive interest rate hike expectations from the U.S. Fed. The U.S. Fed officials advocate for further 50 basis point rate hikes amid hotter than expected U.S. inflation and strong economic data. The U.S. PCE price index shows growth of 0.6% in January against a growth of 0.4% in December month. We expect gold and silver to remain volatile in today’s session. Gold has support at $1798-1788 while resistance is at $1820-1832. Silver has support at $20.62-20.48, while resistance is at $21.10-21.22. In INR terms gold has support at Rs 55,170-54,940, while resistance is at Rs55,660, 55,850. Silver has support at Rs62,950-62,420, while resistance is at Rs63,890–64,480.

CRUDE OIL

Crude oil prices recovered from their lows amid tight supply conditions from Russia. Expectations of steep production cuts by Russia from next month supported crude oil prices at lower levels. Russia’s plan to cut its oil exports from its western ports by up to 25% from March, which exceeds its previously announced production cuts of 5,00,000 barrels per day. Increasing demand from China and India are also supporting crude oil prices at lower levels. However, strength in the dollar and higher U.S. oil stocks restricting gains of crude oil. The dollar index crossed 105.00 marks last week after upbeat U.S. economic data and anticipation of further interest rate hikes. Higher U.S. crude oil inventories are also limiting gains of crude oil in the international markets. Crude oil is having support at $75.80–74.60 and resistance at $78.40–79.20 in today’s session. In INR Crude oil has support at Rs6,270-6,180, while resistance is at Rs6,450–6,540.

USDINR

The USDINR 28 March futures contract closed above 82.85 levels on a weekly closing basis. As per the weekly technical chart, we observed that the pair is trading above its trend-line support level of 82.20 and RSI is fetching above 60 levels. Looking at the technical set-up, MACD is showing negative divergence but the pair is witnessing an uptrend for the last five weeks. If the pair continues to sustain above 82.85 it could test 83.10-83.30 levels; support is placed at 82.55-82.40. We suggest buying in the pair in the range of 82.70-82.70 with a stop loss below 82.40 for the targets of 83.10-83.30.

PFB the comment on bullion, crude oil and currency by Rahul Kalantri, VP Commodities, Mehta Equities Ltd