Year to date, the commodities market has seen some standout performance, says Yeap Jun Rong, market strategist at online trading provider IG.
Cocoa prices have surged by 180% till date, while precious metals like gold and silver have gained over 20%, he adds. “The rally in precious metals has been fuelled by persistent geopolitical uncertainties, including conflicts in Eastern Europe, the Middle East and US-China trade relations, which have supported safe haven flows.”
Performance of asset classes, year-to-date
Notably, gold demand has been further supported by central banks — particularly in emerging markets such as China and India — actively diversifying their reserves to reduce reliance on the US dollar.
Silver prices have exhibited a “broader upward trend” since March, characterised by a series of higher highs and higher lows, notes Yeap. However, upward momentum has recently weakened, with the emergence of a minor “head-and-shoulders pattern”.
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This formation places the neckline at the critical US$30 ($40.52) level as a key support line for buyers to defend, says Yeap. “Notably, this level also aligns with a confluence of support from an ascending trendline and the 200-day moving average.”
According to Yeap, a “decisive break” below the US$30 level could open the door to a deeper pullback, potentially targeting US$27.80 as the next support. “Conversely, holding above US$30 would likely reinforce the broader bullish trend, positioning buyers to aim for the next resistance at US$32.55, followed by its decade-high at the US$34.87 level.”
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Meanwhile, the US$2,720 level has proven to be a critical resistance for gold prices, with the previous two interactions triggering “significant short-term bearish reversals”, notes Yeap. “A move above this level would serve as a strong bullish confirmation, potentially opening the door for a move above its October high.”
According to Yeap, the broader uptrend remains intact, supported by gold prices trading above the daily Ichimoku Cloud and its 100-day moving average, creating a support confluence near the US$2,610 level. The Ichimoku Cloud is a collection of technical indicators that show support and resistance levels, as well as momentum and trend direction.
However, a break below the US$2,610 level could signal a potential bearish reversal for gold, opening the door for a deeper pullback toward the next support level at the US$2,531 level, says Yeap.
Charts: IG
