Market strategist Phil Streible says silver is one of the most undervalued assets on the planet. With ever increasing industrial uses, silver demand is outstripping supply. "There's a major disconnect between where paper silver trades at and physical silver trades at," he says, "and I believe that those two need to narrow."
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0:00 Intro
1:04 Powell's speech
5:18 Gold/silver forecast
6:41 Silver undervalued
9:31 Gold/silver ratio
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See Full Interview Transcript Below
Elijah Johnson: Hey everyone this is Elijah K. Johnson with Liberty and Finance and back with us today is Phil Streible the chief market strategist at Blue Lion Futures, Phil thank you so much for joining us today
Phil Streible: Yeah thanks for having me
Elijah Johnson: It's great to have you and I'd like to talk about Powell's speech today now he chairman Powell of the Federal reserve said that the Fed could start tapering by the end of the year although he said you know any rate hikes different economic conditions are going to have to show up before that happens so your perspective on how Powell's speech kind of shaped the market dynamics today
Phil Streible: Yeah people were investors were really connecting the two between the beginning of tapering and a interest rate hike to follow quite quickly and what chairman Powell did was he said that they did not want to make any kind of ill-advised moves so he separated the connection between tapering and rate hike and what they did was they really pushed the focus on the recovery and the labor recovery so we're going to go back to an extremely data driven sense in the market but by him being so dovish the concerns were primarily around the Delta variant and that impacting the labor recovery that that's the reason why we saw the market, just all markets basically start to inflate as the day went on
Elijah Johnson: If there is fear regarding the delta variant why do you think the markets are still rising
Phil Streible: Because the delta variant what it does is it slows down the pace of the recovery with the labor market and the labor market is the catalyst that the Fed needs in order to actually ink on paper when they're going to raise rates so as long as that's lingering out there the pace of this recovery on a jobs front just isn't there so they can't do anything so your next big opportunity in the markets for buying any kind of correction is going to be when we have next week that ADP number that comes out on Wednesday and then followed by the payroll number on Friday any one of those two coming at higher levels that's where you'll see any kind of correction occur
Elijah Johnson: So overall this message from the Fed was dovish it seems like
Phil Streible: Yes and the reason is that they came out and they really reaffirmed that they're not going to do anything for quite some time they're really going to focus on becoming more data driven looking at the missing component before they can raise any kind of rates which is a snapback in employment so your next opportunity where you're going to be able to buy a correction in most markets including gold and silver is going to be the ADP report which comes out next Wednesday followed by the payroll report that comes out on Friday if any of those two beat expectations, the hawkishness will slide a bit over you'll see small snapback on this this launch that we saw today and I think that's your next opportunity to get in
Elijah Johnson: What is your perspective on how the stock market has been reacting recently because we've just seen it continue to hit all-time highs and again today hitting an all-time high with the Fed announcement
Phil Streible: Yeah it's pretty incredible the Russell 2000 hasn't hit it yet that's your small cap stocks however all your mega cap your big technology names your Nasdaq your S&P500 those have done quite well they actually do well when you go into other economic regimes like a stagflation or even a deflation, people will go into large market cap names for safety, so the S&P500 and the Nasdaq paint a very good picture coming into the year-end regardless of how the economy performs where you get the Russell going up is if you get the reflation trade and that breakout that we saw over 2251 caused everyone to jump back in all their small caps all those favorite stocks that people had back in the fall and parts of the spring they were all green light to jump back into them today with that breakout
Elijah Johnson: And as for gold and silver we have seen a pullback this last month however on the Fed's announcement they both rallied gold is back above 1800 and silver just above 24, where do you see them going in the near future
Phil Streible: We're right at our resistance points on here so the probable range on gold for instance was 1771 on up to about 1818/1819 it does fall in line with a lot of major moving averages which gold has failed at these points if we get breakthrough here, so say Wednesday's ADP number comes out and it's a bit of a miss or the non-farm payroll is a miss on Friday you should see gold extend its gains up to our next three star major resistance 1835 to 1840 again if you get those better numbers you're going to see a pullback, silver rallied a bit outpaced gold about two to one on after Powell's speech up about one and a half percent for gold up about point seven five that's more of that reflation play more of that growth play more small cap stocks, silver's got a lot of work to do it broke out just above its near-term resistance but we've got several legs higher and it's almost every round dollar higher of resistance
Elijah Johnson: And if we kind of rewind the tape here and we go back to the end of January early February and we saw the first silver squeeze and we saw silver in a touch you know around thirty dollars, we're six dollars below that even though you know there has been this movement to accumulate physical silver what do you make of why silver is six dollars below you know the high that we saw you know early February
Phil Streible: Yeah a number of factors you know we are seeing a lot of hedging on the front so you have a lot of paper silver come in it's the miners that sell forward production just like an oil refinery sells oil going farther out using contracts they have done that that's underpinned quite a bit also the demand the demand hasn't been there as much that we would like to see with solar panels green energy things like that it has come off a bit and I really believe that you know investors they saw gold out performed silver and they tend to get a bit frustrated, the washout that we saw last week again had really pressed them out so traders are looking at other alternative assets we've seen Bitcoin recapture 50,000 Ethereum break back through 3,000 you know I'm not saying right or wrong if you know me personally I'm a big silver bug I'm a believer I think that it's one of the most undervalued assets on the entire planet so don't think I'm bashing silver at all, I'm as frustrated as you are that that it hasn't taken off
Elijah Johnson: So in your view what makes silver one of the most undervalued assets on the planet
Phil Streible: Because of the fact that the number of fundamental uses not only technologically but also medically continue to advance on silver and the demand and the number of uses continues to outstrip supply there's a major disconnect between where paper silver trades at and where physical silver trades at and I believe that those two need to narrow like I said that you know if you look at silver that's held in exchange warehouses like something like the CME there's a finite amount of it but there's a number of paper that's out there chasing those prices, if people were to take delivery of all the silver that's held within the warehouses you would see a shortage that's out there and the prices would naturally come back up much like we see boxed beef cutout values and in live cattle prices they tend to narrow and come disconnected I think silver needs to see that where prices come back up to the physical sense
Elijah Johnson: And as we've seen this pullback recently silver has been hit harder than gold we've seen this gold silver ratio around 75 now and that's relatively high where do you see that heading in the near future
Phil Streible: It's tough to say it depends on economic regime if we go into a deflationary period you're gonna see gold futures outpace silver if we go back into reflation or stagflation silver futures will continue to come up, remember gold and silver there as much as people link the two together they are completely separate assets, silver is actually really used it's a direct correspondence of reflation it's actually the Achilles heel of it is that it's so interconnected with gold and gold prices that you have people with the same mentality buying and selling them together if silver was able to trade on its own by itself you should see silver prices move up with prices of oil and lumber and agricultural products is strictly an inflation play where gold futures are something that's more of a store of value
Elijah Johnson: Now going forward here the demand you're saying for silver is largely going to be industrial and it's very it's used all over industry and we're seeing the production you know we've seen this silver supply deficit for quite a while then your perspective it seems like for the long term you're looking for increased demand for silver and not as much increased demand for gold yeah gold
Phil Streible: Gold has to, what needs to happen is gold has got its own battle going on with crypto currencies on the dominant you know market regime of what is a viable asset class to hold given a number of different outcomes where you know silver I believe that it would take one catalyst to start to get it to break out you could see how you know risk is just slowly spread out and then all at once it builds up and it's like a pot that boils over so silver's waiting for its next catalyst in order to do that, I'm not sure exactly what it's going to be it could be just a surely technical breakout but I know we've seen so many stocks so many other asset classes really take off in value that it seems like silver goes through a cyclical motion and you know I think it's advantageous to take advantage of lower prices for long-term price appreciation
Elijah Johnson: Definitely a lot of people have been saying you know how right now seems to be a good time to accumulate however some people are saying it could go lower from here your perspective
Phil Streible: Yeah I don't see sub 20 silver I believe that $22 dollars is far too cheap we saw a rejection on the last time it broke $23 so we've got to be right around that that right price where people you know you get that bull bearer line I just I don't see as much you know opportunity for reward for someone to aggressively short sell silver below $23 it just does not make sense where when you get a massive price spike you'll see short sellers come in but not only them but mining companies that want to forward hedge production will come in it's advantageous for them as a company to short sell when you go north of say $30-$35 because it could smooth out their profitability over the long run
Elijah Johnson: So it seems like little downside potential but high upside potential is what you're seeing
Phil Streible: Absolutely I think that it's very skewed downside to upside as far as risk reward I see the upside being much greater
Elijah Johnson: Well Phil Streible we really appreciate all your time and insights today before we let you go did you want to share with the viewers any last thoughts you'd like to add and where our viewers can find you online
Phil Streible: You can always reach out to us at http://www.bluelinefutures.com we've got a great research report that we write on gold and silver as well as a macro backdrop that we put out every day called the Morning Express and it's also written by my partner Bill Baruch
Elijah Johnson: Awesome Phil thank you so much for your time and God Bless
Phil Streible: Thank you for having me
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