Sterling Silver
Silver – Silver futures are higher in early trading, sparked by weakness in the greenback. Precious metals have gotten a lift recently with petroleum prices skyrocketing and inflation fears mounting. Silver, as a dual-use metal, has also benefited from strengthening industrial metal prices. Friday's PPI number was mixed for precious metals traders – the overall figure was inflationary, but core PPI was tamer than forecast. Traders should have a better overview of inflation following Wednesday's CPI data. Crude Oil is trading at record levels once again this morning and if prices do not reverse course, the likelihood of higher inflation spilling over into the economy would likely increase. December Silver is trading above resistance of $14 this morning, which could lead to further technical buying. Momentum is beginning to show slight divergence from RSI, which could temper some enthusiasm for the metal, especially with resistance at 14.200 coming into the picture. Momentum remains strong overall, coming in at +1.210, but the RSI comes in overbought at 75.5 percent. A solid close above critical resistance at 14.200 could send prices soaring to levels not seen in quite some time. Support can be found at 13.600 and 13.250, and, in addition to 14.200, resistance comes in at contract highs of 14.565.
Crude Oil – November Crude Oil is trading just below $85 after setting a record close on Friday. While bullish inventory numbers aided prices last week, political tensions are sending prices jumping this morning. The Turkish parliament is voting this week on whether to attack Kurdish bases within Iraq to counter their domestic Kurdish insurgency. A larger-scale military conflict between Iraq and Turkey would interfere with petroleum production and exports, and would threaten to destabilize the region. Given the tendency for Crude traders to immediately pump in a “war premium” in response to any geopolitical tension, prices may skyrocket if and when the first shots are fired. November Crude is currently in uncharted territory, giving traders a difficult time locating resistance areas. Friday's close was a breakout above previous highs of 83.42, which would be seen as support with a few solid closes above this area. Momentum is beginning to lag a bit behind the RSI, which could lead to some consolidation. Support comes in at 82.34 and 79.00, while the market may find some resistance at the 85.00 and 87.00 areas.
Wheat – Wheat traders were disappointed by Friday's USDA data, but the underlying fundamentals remain strong. Traders may want to keep in mind is that this was not really a Wheat report – the main focus was on Corn and Soybeans. With Corn finally finding some solid footing, traders began liquidating the long Wheat / short Corn spread, which sent the market into a tailspin. Overall, fundamentals remain strong, with world carryout expected to be at its lowest levels since 1948, cuts to the U.S., European and Australian Wheat crops, and increased exports offsetting lower feed use. Technically, the picture for December Wheat is not as rosy. The market is very close to breaching the key 830 area, which could trigger a substantial sell-off. Momentum remained positive despite closing limit down to come in at +11.50, and the RSI is neutral at 38 percent. In addition to 830, support can be found at 815 and 760, while resistance comes in at 895 and 911.25.
Rob Kurzatkowski, Commodity Analyst
