“Good news is not necessarily good news.” - Eric Sprott on current sentiment -Weekly Wrap Up (Nov 2, 2018)

Transcript:

Announcer: You're listening to the Weekly Wrap-Up on Sprott Money News.

Craig: Well, greetings once again from Sprott Money News and sprottmoney.com. It's Friday, the 2nd of November 2018, and this is your Weekly Wrap-Up. I'm your host, Craig Hemke and joining us, as usual, this Friday morning is Eric Sprott himself. Eric, good morning.

Eric: Craig, good morning. Kind of an up and down week, some...lots of good things happening, some not so good things happening. Let's chat about it.

Craig: Hey, Eric, I've got a new promo for you this week, you ready?

Eric: I am.

Craig: You know, a lot of people aren't aware of this. In fact, it's not something I was really aware of, but coming up in five days, the Indian tradition of the Diwali Festival of lights begins. Now, I mean, this is something you and I can get behind. This is the triumph of good over evil, right? You and I are out there.

Eric: We need more of that.

Craig: Exactly. So this is my kind of festival here. Diwali marks the Hindu New Year, and it is during this time that many people consider investments in gold to be lucky. We need some of that too, don't we?

Eric: I get the analogy with good over evil for sure if I was investing in gold.

Craig: Yes, exactly. And it actually says that forces of light over the forces of darkness. You and I have been fighting the forces of darkness now for a while. Anyway, gold is a lucky investment, so you can invite prosperity into your home this Diwali by buying a 25-gram gold maple at a special price like and for those who like silver as well you can get a one-ounce silver Sprott round at 69 cents over spot. So all this can be found at sprottmoney.com, or you can 888-861-0775. Like I said, even if you don't practice Hindu, man, get behind the triumph of good over evil and invite some luck into your home by buying some gold. All right, my friend, I almost feel like we had a little bit of luck this week and that gold was getting smashed Monday through Wednesday and then it turned around and came flying back yesterday. Now we're about unchanged on the week, silver's up maybe a couple of cents. How're you feeling at this point?

Eric: Really it's hard to know what to think because one of the articles I happened to read this week was a technical article and I think the guy said, "Well, you know, if it closes in a four-hour time window below 1226, it's going to go down." And sure enough, in a four-hour time window close below that and next thing you know it's below the 100-day moving average at 1220, and then the next thing you know it's down I guess pushing 1210. And then boom, two days later it's up at the recovery high here of 1236, and as you and I speak right now, it's at 1231. And I really was debating, you know, what was the reason for the big move on Thursday, the $20 move in gold? Wasn't sure whether it was, you know, trade talks back on, basic dollar weakness, of which there was considerable dollar weakness, like, that was a bad day, it almost went down 1%, or whether it was some talk about Larry Kudlow saying that, you know, the president hasn't phoned chairman Powell about the interest rates, which is to suggest if he did phone chairman Powell about interest rates he would say, "No, Moss please," which of course would be very, very constructive for gold.

And even this morning as I....and, of course, the better mover was silver with I think it was 50 odd cents yesterday, which was to tighten up the ratio of gold to silver. But even today, looking at what's happening, we had a good jobs number with the nonfarm payroll supposedly being up to 50. We know my thoughts on the BLS, Bureau of Labor Statistics data, so let's not go into that. But the fact that I'm sitting here looking at gold being down $1.90 with that kind of number surprises me. You know, you wouldn't think that the boys would have been out there really carving it up.

And speaking of the boys, I mean the boys, the commercial banks, when gold first moved back up into the 1230s, they sold every contract that the hedge funds who were short wanted to buy, and you've commented on that before in some of your papers. And there were just a huge reversal of roles there, a little bit, again, last week. And then all of a sudden, now we're back up to the 100-day moving average and, undoubtedly, the hedge funds have to buy again. It's like, man, they got double-crossed here, you know, and they're just getting b-slapped here around by the commercial bank. So it's sort of interesting to watch. You know, if we all want to get back to fundamentals, I think the fundamentals are good, various central banks are buying the coins. The interest in coins is picking up. There's plenty of the....if look at the volatility of currencies, and there's no doubt that most of the world's population would be wanting to own gold rather than their domestic currency. So there are lots of good things in place, and I think you have some information that the World Gold Council put out on a third-quarter data.

Craig: I do, Eric. I think I've taught you to become the king of the segue, very good. I like that. All right, my friend. Yeah, your friends, your good friends at the World Gold Council, you know, they put out these reports every quarter, Eric. The latest one came out yesterday, and they noted all of that central bank buying that you just mentioned. But here was the one bit of...I don't know how they come up with this stuff frankly. But they characterized gold investment demand as well and I thought this was interesting. For the third quarter, China had gold investment inflow demand of 86 metric tons, India had an inflow of 34 metric tons. So what are we at now 117? At the same time, the global ETF, which allegedly hold a bunch of gold, they had outflows of a 103 metric tons. Can we connect the dots? Do you think, there?

Eric: It sounds like something was going from west to east.

Craig: It sure does.

Eric: And I think the ETFs are a little more volatile, obviously, than Chinese and the Indian mine which is a lot more stable. And I think, subsequently, like, I wouldn't be surprised that in the month of October that...I don't have the data in front of me, but I'd be pretty certain that the ETF was quite positive this month for gold demand.

Craig: Yeah. And I keep track of it every day. So now you got to start to wonder where it's coming from because since October the 5th, just the GLD has seen its alleged inventory go up by 30 metric tons, so, again, gold coming from everywhere, I guess.

Eric: And, of course, we talked about the Swiss data last week showing this huge flow from west to east, and I just can't see that changing here with the way Russia views the U.S. and the way China views the U.S. and the free world, if you will, okay? They're the developed world. And I think those trends will do nothing but to carry on here. So, for gold to get its footing back, I mean, with just one sniff of the Fed not raising rates...and, of course, we get sniffs in the sense that the market got curved up pretty good in October. We'll see where that goes. It's had a bit of a rebound here these last two days and looks like today might be a positive day. We'll see and wait for the close as you know.

But I would say that, you know, people are becoming way more circumspect about the earnings. I see that Apple the stock's down 5% because they've changed a few of their metrics around of what they're prepared to tell shareholders. And there's been many other stocks that haven't come through, so we have a different market now where bad news is bad news and good news is not necessarily good news. So you can sense a change in the sentiment as to how people are looking at stocks. I think we've had this long, long run off the old nine bottom here and maybe we're getting a little long in the tooth and certainly knowing that most stock markets in the world are in bear markets, there's margin calls going out around there. And you normally you sell your winners, and your winners happen to reside in North America, so they've been sellers.

Craig: Yeah. Eric, let's conclude by focusing on a sector of the stock market, that being the mining sector. We talk about that a lot almost every week. It was interesting last week as the sector as a whole, if you want to look at, like, the HUI index, just got smashed after a lot of the majors reported lousy earnings, big shock there as prices were falling. But yesterday, with gold and silver rally, something like the HUI came screaming back and now it's almost all the way back to where it was before that disaster of last week. Does that kind of represent some underlying interest, some underlying strength? Are we kind of seeing the sector get a little more interesting as we head into the end of the year?

Eric: I think the bounce-back in gold here has been well recognized. I mean, it's, you know, it's not as though we have clear sailing for gold. We've had I think two $20 days in the last two or three weeks, which is very, very, very unusual. And of course, we see some of the physical data that's very positive. There's lots of market jitters, and I'm sure a lot of people are looking at stocks in a very different light these days in the mining side knowing that they can change so quickly and that the price of gold can change so quickly. These stocks do tend to spurt along very, very quickly. I should say we've had some good earnings. I mean, I talked about, you know, what Kirkland kind of looked like for the quarter. Well, they've now reported the quarter. They earned 29 cents adjusted, which puts them at a pretty good multiple here. They've had good drilling success from the exploration front and that Fosterville mine continues to deliver, so everything's well in train there.

And it is disappointing that the majors, which are such a huge influence in the ETFs, have not done well. I mean, there's too many companies that are losing money with gold at these prices and whose production's going down because they sold off some of their mines. So it would be really good if we could pack in a good quarter here amongst the majors. As there is in any business, there's always an opportunity to find something that is going to break away from the pack. And luckily, Kirkland's kind of done that for the last two years, and I think, hopefully, will continue to do it. And then there are other things that we're all watching that could be quite exciting. I've mentioned a couple of them before, whether it's Wallbridge or [inaudible 00:11:37] Minerals. They're intriguing and, you know, they could explode out if things fall into place for them. And a lot of us have to sit and wait and see that happen. And if it starts happening, we'll be the first ones to hear about it.

Craig: Let's hope so. And it's often good. It seems like the last several years we've turned up into the end of the year in both shares and the metals and kind of carried over some momentum into the New Year maybe we can pull that off again this year.

Eric: Well, one of the problems, of course, is you get tax loss selling, right?

Craig: Right.

Eric: And I'm not so sure we're finished with tax yet, so if you have a loser, I don't think it's going to be very comfortable six weeks going forward here, and you have to wait till almost December 15th for that to stop. But typically, post-December 15th you can get some very exciting things happening. So anybody who's sitting with dough I would say think September 15th, watch for stocks that have been under pressure and perhaps undue pressure and buy accordingly.

Craig: And, of course, if you're sitting with dough, see here's one of those segues again, Eric, the folks at Sprott Money have a very exciting deal for our storage clients here in the month of November. If you're a storage client, you can buy a one ounce American Silver Eagle at just $2.99 over Sprott. That's a great deal if you're a storage client, you can do that. If you're not a storage client, you can become one. All you got to do to take advantage of this deal is open a storage account with us and you'll get access to this offer. Again, you go to Sprottmoney.com or call 888-861-0775 to take advantage of it. Eric, it's always a pleasure to visit with you. It'll be interesting to see where we go in this upcoming week, and I look forward to talking to you about it next Friday.

Eric: Every week's an exciting week, something will happen here, so stay tuned.

Craig: All right, my friend. You have a great weekend and from all of us here at Sprott Money News and sprottmoney.com, we wish you a great weekend as well, and we'll talk to you again next Friday.