The week initiated with a continuation of upward momentum as the market participants started pricing in a 25 basis points cut by Federal Reserve in upcoming rate meet after Institute of supply Management reported a fall in Purchasing managers Index to 49.1 levels in August, lowest reading from last three years. The precious metal made high near the psychological resistance of 40,000 levels but showed signs of exhaustion after China rejected for escalating the trade war by approaching U.S. Trade representative with a ‘calm’ attitude on negotiating the ongoing tariff terms that called for long liquidations and precious metal started losing its luster that brought a slippage to a weekly low of 38,376 levels. The momentum of liquidity started shifting to other safe- haven assets as one more cut was discounted by the investors after more-than-expected cuts in Non-Farm payrolls to 130K reported by U.S. Bureau of Labor Statistics failed to provide any cushion to the falling prices.
On daily scale, MCX Gold has formed a ‘Bearish Divergence’ in which the prices rise to a new high, decline and then traces a new high but oscillators formed a different pattern. The precious metal is closed below 10 days (High-Low) Moving Average after the bullish trend got exhausted. The precious metal is likely to witness downside once it will slip below 38,376 levels to a low of 37,786 and 37,124 levels respectively.
MCX Crude Oil
Supply cuts from OPEC, expansion in services sector of China as the data showed an uptick in August and continuous slippage in crude oil inventories held by U.S. firms failed to push the crude prices out from the shadows of demand worries as the black gold prices were extending their downside. Slowdown in demand due to escalating tariff war was the only factor that was gripping over every buck at which the black gold was selling in the global markets but the resumption of trade talks for negotiation between the largest economies brought a sign of relief as it may curtail the demand worries and provided a cushion to the falling prices this week. As per the Energy Information Administration, crude oil inventories fall by 4.771 million barrels from the previous week. The greenback government reported that the U.S. stockpiles now stand at 432.556 million barrels on Aug 30.
On weekly scale, MCX Crude Oil is closed near the previous supply zone due to which the counter was trading back and forth. The counter is closed near 100 weeks Moving Average and likely to see liquidity from the investors once it will breach the primary trend line placed. DMI’s are signaling for a convergence while ADX is hinting for exhaustion of downward momentum. Next week, a break above 4,100 levels will push the prices to 4,242 and 4,351 levels respectively.