Silver Drops But Prices Will 'Snap Back' Above $17 - Phil Streible
(Kitco News) - Silver prices plunged on Friday as traders were busy digesting U.S. employment data from September, which boosted Federal Reserve rate hike expectations due to lower unemployment rate and higher wage growth.
However, Chicago-based trader Phil Streible expects prices to snap back in the near term.
“I think metals will snap back next week,” the RJO Futures senior market strategist told Kitco News in a phone interview Friday. “Silver could move back over $17 in the near future.”
December Comex silver prices dropped from $16.68 down to $16.36 and then recovered to $16.69, up 0.31% on the day.
The move came after the Bureau of Labor Statistics said that payrolls declined by 33,000 in September as Hurricanes Harvey and Irma negatively impacted the employment situation in the country. The change marked the first drop since 2010.
However, Streible said he is focusing on the gold-to-silver ratio right now, which sits at around 77.
“Silver is becoming too cheap in correlation to the gold market,” he said. “It’s a buy. I would look at buying silver and selling gold against it.”
Weak employment data typically work in favor gold and silver, but there are a few factors working against the precious metals right now, Streible pointed out.
“Regardless of weak jobs data, jobs should return quickly and business should become more normalized,” he said. “The unemployment rate also kicked down.”
The Bureau of Labor Statistics data showed that the employment rate dropped to 4.2%, marking the lowest level February 2001. On top of that, wages, another key element in the report, came in above expectations in September. “In September, average hourly earnings for all employees on private nonfarm payrolls rose by 12 cents to $26.55,” the report said. In the last 12 months, wages have grown 2.9%.
At the same time, Dallas Fed President Robert Kaplan came out saying the negative effects from the hurricanes are “temporary” and he remains “open minded” on a rate hike in December. According to CME’s FedWatch Tool, markets are pricing in an 86.7% chance of a December hike.