There has been enough price action within commodities to warrant a review... Silver is a standout
Recent research has had its fair share of international commentary, and for good reason. Less frequent in its analysis has been commodities, which fell below internationals within the broad DALI rankings to open June. The most likely reason for the lack of distinct research on the group is somewhat simple: long-term themes have stayed largely the same. Precious metals, namely gold, remain relative strength stalwarts while energy focused areas have continued to lag behind. Today’s feature takes a moment to judge the strength of said long-term themes, touching on a handful of interesting performance metrics & technical pictures for the leaders and laggards of the space. Since the start of June, crude oil CL/ has advanced nearly 4% while gold GC/ has fallen just under 1.5%. While it goes without saying that a mere one-week performance spread isn’t enough to change our technical opinion on the space, it is enough to revisit some PnF charts to check under the hood of commodities RS picture.
Starting with the RS leader, gold has consolidated over the course of the last few months. The default chart is a bit choppy, so we will zoom out to a less sensitive 40-point scale (below). Interestingly enough, the precious metal posted its first sell signal since 2022 on this chart… and while one signal towards the downside certainly doesn’t make a trend a continual failure to break past $3,400 would certainly be telling as a longer-term resistance point. Despite the slowdown for gold, its cousin silver SI/ hasn’t consolidated quite as much, returning to a positive trend and breaking to levels not seen since 2012 in June. Regardless, both options remain quite strong and the overall message remains pretty clear: Precious metals leadership remains pretty consistent, even if gold is struggling a tad in the near-term.
Given this near-term uptick for silver, we can compare the two precious metals against each other using a 3.25% chart. While the long-term picture continues to favor gold, the chart below shows silver SI/ returning to a column of X’s against gold GC/ for the first time since late October. While neither a signal or column switching strategy is particularly additive when compared to a simple buy and hold strategy of either asset, the chart itself is largely consistent in movement, a point to remember if we see further silver outperformance.
Crude oil CL/ has put together quite a different technical picture than other areas within commodities. We have mentioned it as a laggard for quite some time now, seeing upside action continuously thwarted by stiff resistance or negative trend lines over the better part of the last year and a half. June’s action has seen black gold break a triple top buy signal on its default chart, a positive at first glace. Upon further review, CL/ isn’t out of the woods quite yet, seeing it now test a significant level of old support and its bearish resistance line all within earshot of current levels.
All this to say, exposure to commodities within your client accounts should still be tilted towards precious metals, despite the last few weeks of underperformance. If trends shift and improvement for energy focused areas continues to emerge, momentum strategies may shift. Until that improvement is seen however, continue to focus on those areas that have shown relative strength so far this year.
