I think the silver event is even bigger than bitcoin rallying up: Chief Market Strategist

Phil Streible Blue Line Futures Chief Market Strategist joins the Yahoo Finance Live panel with the Silver outlook as prices jump more than 10% as Reddit traders try their squeeze play with the metal.

Video Transcript

ZACK GUZMAN: Welcome back. From GameStop to what looks like potentially silver, we are seeing at least some part– of course, it’s not all monolithic– at least a piece of Reddit’s Wall Street Bets forum maybe shifting their attention to silver. And take a look at this, you’re looking at BlackRock’s iShares Silver Trust, the largest exchange-traded product, tracking the metal, seeing a big pop today on that interest in silver, as it enjoys its biggest one-day boost since 2008.

And for more on what all this means, I want to bring on our next guest. Phil Streible is Blue Line Futures chief market strategist, and he joins us now. And Phil, you were just talking to us in break that this move isn’t necessarily all triggered or wasn’t just out of nowhere. Talk to me about how much of this came before even maybe Reddit took an interest.

PHIL STREIBLE: Yeah, we’ve been positioning ourselves for a long-term play on silver, especially for the first half of 2021. We have looked at the re-opening process and the growth in electric vehicles, the growth in solar, and we were positioning ourselves for a gradual move higher. We do– did have a price target of $30 to $35 for the first half of 2021.

It just happened that we had an army of individuals that had– you know, got done being tired of being long Bitcoin and Tesla. They rolled into high-short-interest, high-beta plays. They squeezed hedge funds higher, and now they’re looking for other targets. And silver is a likely target, just based upon some of the dynamics, that they’ve got limited supply of silver, increasing demand, high short interest, and it’s a high-beta play. So why not, you know, go into it?

AKIKO FUJITA: So let’s talk about your thesis. Because at this point, I think there’s some debate about who’s actually behind the big jump that we have seen. And when you talk about positioning on that front, at least in this particular precious metal, how much of that do you think– how much of that, for you, has extended beyond the metal itself, looking at miners, for example? I mean, what are you anticipating, in terms of upside, on that front?

PHIL STREIBLE: Well, on the miners, I mean, you really need to break down as to, like, the miner that you’re getting involved with. Because we’ve seen three or four targeted that they’ve done a great job. They’re well-run mines. But when you get into other ones, the mines themselves, they might not be producing the metal that you’re looking for. A lot of them produce several different metals. You’ve got to look at the countries they’re in. You also have to look at energy costs, labor costs, and rising interest rates. They’re all going to weigh in on these underlying junior miners.

So the pop in those might not be an extension, and it might just be a short-lived event. Where if you look at the futures in some of the ETFs that are backed by, you know, the physical, those have a better potential to continue to move up and hold and progress forward. A company could also issue more shares. You guys always got to remember that.

ZACK GUZMAN: Yeah, and Phil, I mean, when we look into it, it’s been interesting because some people have pushed back and said, look, maybe hedge funds or bots could be driving the interest in Wall Street Bets, the forum on Reddit here. When you look at the move, though, talk to me about what you’re seeing. Because the extreme of today– whenever you go back and say silver is having its best one-day move since 2008, a lot of people will look at that and say, what’s really going on here? So what kind of volatility does that maybe trigger in the commodities market when you see a move like that?

PHIL STREIBLE: So we did see implied volatility premium– it just went through the roof, which means that the second that the market did open, everyone tried to buy it at any and all costs. And like I told people, you really– this wasn’t something– this is something you should have been building for a long period of time on silver, based upon classic supply-demand fundamentals. You don’t want to be the guy who’s buying fire insurance while your house is on fire, and that’s kind of what we saw this morning.

So naturally, silver gave back some of its early gains. We’re really looking to see if it can close over $30 and extend from there. You know, a lot of these markets, like what we saw in GameStop and even what we saw in Bitcoin– you know, when Bitcoin broke out over $11,500, had a next resistance point of $20,000. Once it broke out through there, it seemed like it was really, you know, game on– and the same thing with GameStop. There’s no telling how high they can push these. How much are they going to trigger, as far as, you know, some of those shorts buying back?

And you know, the commercials, they could always lift some of their shorts. A lot of, you know, airlines and a lot of producers, when it came to oil, necessarily lifted some of their shorts and some of their hedges, especially when prices were either dropping too fast or they were rising too fast.

AKIKO FUJITA: And Phil, you said that you see it pushing above $30. We’re already at $28.74 right now. Walk me through the fundamentals and specifically, what you think that says that supports the case for this to move even more to the upside.

PHIL STREIBLE: Well, we would really anticipate that, you know, once we get the close over $30, you’re going to see another rush to come in. And based on a technical chart pattern, it’s going to validate a breakout over a– it’s a bull flag that you have, if you pull up a chart. So that’s going to attract a whole other level of people out there that are just specifically trend-following investors.

The other thing that’s an interesting dynamic is that you always had this differential between the gold and silver people. The people that are true believers in it, that was a particular generation, and it seems like there was a gap between those people and the people that buy into Bitcoin and new technology. And what we’re having is an emergence of those two parties together. So I think it is even a bigger event than, say, Bitcoin rallying up. So I don’t want to put out, like, specific price targets on it or how high it could go, but it really could gain some momentum and track higher.

ZACK GUZMAN: Yeah, it’s probably smart because we had a few analysts on in the midst of that GameStop bubble, and you know, no one knew where that was going to go. But Phil, when we look at what you said there on hedge funds or whoever being able to take their short position off, that is an interesting piece of what was talked about in Wall Street Bets. Kind of why this was focused on is because, you know, some banks out there have positions and might not want to deal with the physical server itself. So how much truth is behind that and maybe, you know, the thesis that’s being discussed around pressuring institutions and causing these problems around silver?

PHIL STREIBLE: You know, silver is a very heavy metal. I mean, one of those contracts, like a 1,000-ounce contract, that’s going to be, like, 66 pounds of it. So for them to go through this whole physical, you know, supply squeeze and everything else, for people to actually try and remove this and break some of the banks that might hold it or might be on the paper shorts, they’re really going to have to get that price up there quite a bit.

They’re really going to have to remove the silver from the exchanges by taking the liberty to create some kind of, like, force majeure. That’s how you would seriously break the exchange dynamics and you’d break some of these banks. So they’re going to need to get prices a lot higher. They’re going to need to remove from the exchanges by going through the delivery and loadout process.

AKIKO FUJITA: And we would love to have you back on this show if we do see it dump up in a significant way. Phil Streible, Blue Line Futures chief market strategist, appreciate your time today.


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