Commodities: Silver futures flirt with bull market

Industrial metals and crude oil futures continued rising, with investors in the latter keeping a close eye on Kuwait's oil sector as they tried to determine for how long supplies from the Gulf country might be curtailed by a strike among its public sector workers.

In parallel, front month Brent crude futures were rising by 3.03% to $44.24 per barrel on the ICE, alongside gains of 3.61% to 41.27 for West Texas Intermediate.

The Organisation of Petroleum Exporting Countries would restart talks on freezing their level of output when they meet again in June, Iraq's governor to OPEC, Falah Al-Amri, said on his Facebook page, Bloomberg reported.

To take note of, Kuwait's crude oil output had recovered to 1.5m barrels a day, from 1.1m barrels on Sunday, versus 2.81m barrels a day last month, according to reports.

The strike among the Gulf country's oil workers which had forced it to slash production might last between 10 to 15 days, according to Energy Aspects.

Industrial metals were wanted.

“The metals complex is flying, aided by the weaker dollar and also apparently because base metal buying is considered a decent hedge against the Chinese yuan,” said Brenda Kelly, head of analysts at London Capital Group.

Three-month copper futures on the LME were 2.0% higher to $4,917.50 per metric tonne as of 16:35BST, alongside gains of 0.8% to $1,582 per metric tonne for primary aluminium and lager gains of 1.4% and 1.2% for nickel and zinc futures.

Prices for soft commodities were again higher, with corn futures on Euronext LIFFE ending the day 1.8% higher at €159.75 per tonne, while milling wheat futures gained 2.0% to €154 per tonne.

Cocoa futures on the other hand only managed to eke out a small 0.1% gain to £2,214.00 per tonne. White sugar futures were the lone decliner on Euronext LIFFE, losing 0.6% to $445.10 per metric tonne.

Bloomberg's US dollar spot index was retreating 0.47% to 94.04 and its commodity index up by 2.19% to 166.28.

Gold futures were up by 1.80% to $1,254.72 per ounce, as demand for the US dollar ebbed.

Nonetheless, it was silver that shone brightest, with COMEX traded May 2016 futures jumping 4.66% to $17.01 per ounce.

“Despite all the apparent risk on sentiment, silver prices are surging with gold prices also taking upside cues. The price ratio is now at a 2016 low. Silver’s greater industrial use means it is more sensitive to the industrial cycle and potentially less of a haven than gold. Over the long term (100 years) the ratio has gone below 20 three times and neared 100 twice, so silver does look cheap relative to gold in some respects,” Kelly added.

According to data from Bloomberg, Tuesday’s rally in silver - if it closed at then current levels, would mean futures had entered a ‘bull’ market again, after having risen by over 20% from their most recent lows, with gold just shy of crossing that same threshold.