Commodities Watch: Silver’s bull flag breakout, Brent crude on fourth week of gains

Round-up

Year-to-date, commodities have displayed a stellar performance, with cocoa prices at the top of the performance table (+84%). Extreme weather conditions caused by climate change have been a key contributing factor, which has triggered the surge in coffee prices as well. With the bulk of production revolving around a handful of countries, any unexpected supply distortion from weather conditions is seen to have a magnifying impact on prices.

This week, we look at silver prices and Brent Crude prices, which has both delivered double-digit gains year-to-date as well.

Spot Silver: Breakout of bullish flag as continuation pattern?

Silver has a stellar year thus far, with prices sitting on a 26.1% gain year-to-date. Since June this year, there has been a relatively steady net inflows for the iShares Silver Trust, which saw an in-tandem rise in the exchange traded funds (ETF) holdings from 12,869 tonnes to the current 13,586 tonnes. Rising net inflows into the world's largest silver ETF may potentially reflect higher traction in general.

On the technical aspect, after retracing as much as 12% from its May 2024 high, prices have been back on the rise lately. Recent price movement seem to mark an upward break of its prevailing bullish flag formation, which may potentially facilitate an extension of its upward trend. This comes after prices found a key support at the lower edge of its daily Ichimoku Cloud at the $2,855 level.

Buyers may potentially eye for a retest of its May 2024 high at the $3,244 level ahead, which has served as key resistance on two previous occasions. On the downside, the Ichimoku Cloud base may serve as crucial support to hold, in order to keep the upward trend intact.

Brent Crude: Near-term breather following four straight week of gains

Coming off a strong 13% rally over the past month, Brent Crude prices seems set to close off the week with its fourth straight week of gains. Prices remain sensitive to geopolitical developments in the Middle East, while a recent run of weaker US economic data may offer some reservations for buyers over demand conditions ahead.

That said, on the technical aspect, prices trade within a near-term upward trend, having overcome its daily Ichimoku Cloud resistance for the first time since May this year. Its daily relative strength index (RSI) has also punched above the key mid-line back in early-June, which suggests buyers taking on greater control. Ahead, the US$87.80 level may stand as immediate resistance to overcome. Any successful move above it may place the April 2024 high at the US$91.60 level on watch next.