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Streible: The rise in silver is related to the oil decline and the China data

When Schwab Network lead moderator Oliver Renick asked Blue Lines Futures chief market strategist Phil Streible what he thought of silver's performance on Friday, the longtime commodities expert didn't hesitate to show some enthusiasm.

He reached out of his camera's view and emerged with a red one “Make Silver Great Again” Hat and a few sheets of silver bars, each one ounce.

Silver prices surged during trading on Friday, surpassing $33.50 an ounce, an upside of more than 6%. (Source: TradingView)

Silver prices surged on Friday, rising more than $2 an ounce, or more than 6%, to close at $33.74. Many analysts viewed the $32.50 mark as a critical resistance level, which showed little resistance during Friday's strong move.

A smiling Streible told Renick, “Yes, we are overly long,” when asked about his silver position. He further explained 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

Streible believes the metals were somewhat undervalued after crude oil appeared to take a larger share of the geopolitical tensions stemming from rising violence in the Middle East.

Streible said he believes Friday's move was because traders realized precious metals were undervalued in the short term.

Crude oil prices saw a significant decline during the precious metals rally on Friday. (Source: TradingView)

“Crude oil has been one of the most shorted (commodities),” he said. “There was a rotation from gold to crude oil, and that was seen several times when big developments happened in the Middle East and gold futures didn't even move.”

Over the past eight weeks, asset managers have reduced their bullish bets on gold to their lowest levels, he added.

“Now they look at the China reports overnight, which shows much better economic data than expected, they tried to do everything they can to stimulate and we see copper starting to move – and then “Precious metals and silver rose 6%,” Streible said.

Be careful in the short term

Silver is now trading at levels not seen since October 2012. Streible said that while silver is likely to see an exuberant move on Sunday evening when the futures market reopens, it could also suffer a brief pullback on Monday morning.

“By Monday, a lot of the dust may have settled and we'll see a lot of economic developments throughout the week, and this is a volatile asset class,” he said, adding that his firm deltaed its silver positions by using call Spreads for December have been reduced to $40 and $42.5 per ounce.

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