Commodities outlook: Copper spikes, silver's breakout

by Rajan Dhall from interactive investor |

Always lots happening on the metal markets, and this week is no different. Here's the must-know news.

In a big week for commodities, we have seen a spike in copper prices only to fall back to the mean value pivot level of $2.70 per pound. Gold was also looking pretty promising after some geopolitical tensions in the Middle East and comments from US Federal Reserve member calling for a bigger rate cut than the market expected. 

Interestingly, there were some big moves in silver, gold and platinum together but no real fundamental news. The dollar drop was not enough at the time to inspire such a run either. 

This for me means something is off, and there is a bigger power in play. Odd, I know, to insinuate that these moves were some part of a wider macro move, but the volume and paradigm shift warrants the hypothesis. 

Trade issues still overhang the economic landscape like a dark cloud and the aforementioned geopolitical problems stepped up a notch with Iran seizing two British oil tankers. 

One explanation could be a big draw in inventories in the precious metals complex as central banks stock up on tangible assets. Could it be we are so distracted with the equities bull run or political events (Boris) that we are missing the clues to a massive catastrophe?

Copper bulls have taken another hit this morning from Europe with German manufacturing PMI's hitting a seven-year low. Having said that, the technicals have worked a treat with the sell-off stopping exactly at the trendline pointed out on the chart. 

Today, we are back at the mean value area of this consolidation period. Nevertheless, in the range between $2.60 and $2.75 has been broken to the upside and now it's left to the market to decide if we can bounce at these levels to carry the move higher. This afternoon we get the latest manufacturing PMI's from the US and on Wednesday and Thursday next week we get the latest numbers from China. 

Source: TradingView Past performance is not a guide to future performance

Silver on the daily chart has broken out of some important zones in recent days. The trendline on the chart originated in 2016 and was respected three times or so in a three-year period. 

The most interesting thing on the chart is the volume spike highlighted by the circle at the bottom. The current price action may suggest a pullback, but the $16 per ounce level may act as a support zone on the short timeframes. 

Longer-term, $15.55 per ounce will be a more formidable support zone, but some analysts are calling for much higher targets. The mean value area represented by the bell curve on the left and side of the chart suggests that $17 per ounce suggests that the area could be a sticking point. 

Source: TradingView Past performance is not a guide to future performance

Rajan Dhall is a freelance contributor and not a direct employee of interactive investor.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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