Streible: Silver rally a result of money flowing away from oil, new Chinese economic data
Longtime futures strategist Phil Streible tells Schwab Network that Middle East tensions and rotations in and out of metals, oil caused rise
When Schwab Network Lead Anchor Oliver Renick asked Blue Lines Futures Chief Market Strategist Phil Streible what he thought of Friday’s performance from silver, the longtime commodities expert didn’t hesitate to show some enthusiasm.
He reached out of view of his camera and emerged with a red “Make Silver Great Again” hat and a few sheets of one-ounce silver bars.
Silver prices skyrocketed during trading Friday, surpassing $33.50 an ounce, a more than 6% upward move. (Source: TradingView)
Silver prices skyrocketed Friday, gaining more than $2 an ounce, or more than 6%, and closing at $33.74. Many analysts were eying the $32.50 mark as a critical resistance level, which showed little pushback during Friday’s strong move.
A smiling Streible told Renick, “Yes, we’re excessively long,” when asked about his silver position. He went on to explain the constant fluctuations in the crude oil and metals markets due to geopolitical tensions in the Middle East.
From metals to oil back to metals again
Streible believes the metals were somewhat underpriced after crude oil appeared to receive a larger portion of the geopolitical tension trade stemming from increased violence in the Middle East.
Streible said he thinks Friday’s move was due to traders recognizing that precious metals had been undervalued in the short term.
“Crude oil was one of the most heavily shorted (commodities),” he said. “There was a rotation out of gold into crude oil and you saw that several times with big developments happening in the Middle East and gold futures didn’t even move.”
Over the past eight weeks, money managers had reduced bullish bets on gold to their lowest levels, he added.
“Now they look at China reports overnight showing much better than expected economic data, they’ve been trying to do everything they can providing stimulus, and we see copper starting to move — and then precious metals and silver is up 6%,” Streible said.
Show some caution short-term
Silver is now trading at a level not seen since October 2012. Streible said that while silver is likely to see an exuberance move on Sunday night when the futures market reopens, it could also be in for a brief drawback on Monday morning.
“By Monday a lot of the dust can settle and we get a lot of economic developments over the week and this is a volatile asset class,” he said, adding that his firm reduced the delta on its silver positions by using December call spreads at $40 and $42.5 an ounce.
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