Commodities Watch: Silver prices eyeing for another year-to-date high?

Round-up

The past week has seen cocoa prices rise by 8.0% to top the performance table, as weather conditions are on the radar once more to cast some uncertainties on supplies. Heavy rains in West Africa have put some delay on harvesting efforts, while recent gains follows after a sharp 15% retracement in end-September as well.

Gains were registered in precious metals too, with gold and silver prices edging up 1.9% and 2.9% respectively for the week. The highlight may revolve around oil prices, which are down 3.8% over the past week. Market participants have been fading geopolitical risks on the rising prospects that Iran’s energy infrastructure will not be in Israel’s crosshair, triggering a wave of profit-taking in crude oil prices.

Silver prices: Eyeing for a year-to-date high?

This week, we look at silver prices, which have gained close to 25% since early August this year. We remain bullish-bias on silver prices for the following reasons.

1. Despite surging Treasury yields and a stronger US dollar on a less dovish Federal Reserve (Fed)'s rate path lately, retracement in silver prices has been limited thus far, which reflects buyers’ resilience. Any subsequent cooling off in the US dollar could be a bullish catalyst for silver prices to tap on for further gains.

2. The lead-up to the US election could drive some safe-haven flows for silver prices, although gold prices are generally looked upon as a more credible hedge. The lead that Kamala Harris has over Donald Trump has narrowed over the past week, which makes the US presidential race even harder to call.

3. Despite silver prices hovering less than 5% from a new decade high, holdings in the iShares Silver Trust exchange traded fund (ETF), which is the world’s largest silver ETF, remain around July 2023 levels. This offers room for catch-up ETF buying, which may further support silver prices.

4. Technical conditions suggest a potential bullish flag formation in place (although its recent retracement is to the Fibonacci 50% level, instead of the more popular 38.2% level in bullish flag patterns). A break above the upper trendline, followed by a subsequent retest, offered validation for buyers in control. Its daily relative strength index (RSI) has also defended its mid-line lately.

Strategy: A broader upward trend may leave buying-on-dips as the preferred plan of action. A good area of support may be at the psychological US$30.00 level, where the upper flag trendline may come in as support, alongside its daily Ichimoku Cloud. Prices may potentially eye for a retest of its year-to-date high around the US$32.44 level, with any subsequent break likely to leave its October 2012 high at the US$35.31 level on watch next.