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The Three Most Important Things in Precious Metals Right Now: Silver, Silver, Silver - Weekly Wrap-Up (August 30, 2019)

The Three Most Important Things in Precious Metals Right Now: Silver, Silver, Silver - Weekly Wrap-Up (August 30, 2019)
By Craig Hemke 6 months ago 206659 Views 8 comments

August 30, 2019

As the Labor Day weekend kicks off a three-day break from all the excitement, where should you be looking when the markets open up again? Eric Sprott returns to break down all the week’s gold and silver news, including:

Why silver is poised for big gains

What lower income and negative interest rates mean for precious metals

Plus: Does GLD have all the gold they say they do?

“I’ve been a very busy guy in the silver space. There’s hardly a day goes by that I don’t invest something in some silver mine, some silver ore body. It’s, in my mind, the place to be. And here’s why I get particularly excited by it: I’m looking at the physical-ness of what’s going on in the silver market…. Coin sales are exploding! For example, Sprott Money’s sales are up 500%. I’ve heard of other guys that have had huge number of Silver Eagles that are selling… The short position in the COMEX keeps going up, the short position on the Shanghai Futures Exchange—which people should watch, by the way… These short positions are massive…”

Listen to the Weekly Wrap-Up on: iTunes SoundCloud Spotify Youtube

About Sprott Money

Specializing in the sale of bullion, bullion storage and precious metals registered investments, there’s a reason Sprott Money is called “The Most Trusted Name in Precious Metals”.

Since 2008, our customers have trusted us to provide guidance, education, and superior customer service as we help build their holdings in precious metals—no matter the size of the portfolio. Chairman, Eric Sprott, and President, Larisa Sprott, are proud to head up one of the most well-known and reputable precious metal firms in North America. Learn more about Sprott Money.


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

Craig: Well, hello again from Sprott Money News in sprottmoney.com. It is Friday, the last Friday of August, August the 30th, 2019. This is your Weekly Wrap-Up. I am your host, Craig Hemke, and joining us as usual on this pre-holiday weekend Friday is Eric Sprott himself. Eric, good morning.

Eric: Hey, good morning, Craig. Yeah, we've got to go to a three day weekend with no excitement, no markets open. Oh my God. It's going to be hard to take.

Craig: I know for addicts like us checking prices a hundred times a day, having that three day weekend is tough. Hey, and it is almost September. So before we get started, people always remember that September is a big month at Sprott Money and it's a big month for Eric's favorite pick. So please come by Sprott Money. You don't even have to wait till September. Eric's pick of the month is the beautiful gold maple leaf, gold ground. I mean, if you don't have any of these, you got to get some and you can get them from Sprott Money for as low as $36.99 over spot. Call us at (888) 861-0775 or of course just visit sprottmoney.com to find out more. Eric, I get, but you've got a few of those gold maples banging around in your pocket right now.

Eric: We always have a few gold maples hanging around and I can tell the story that there was a time when the Royal Canadian mint phoned me a number of years ago and said, "Eric, we got all these big 400 bars here and the mint is not doing much. Can you keep us busy for a couple of weeks and convert your bars to coins?" which I did. So yeah, I do. I have a few coins? Yeah, I got a few coins. I love them and everyone should have some by the way.

Craig: Absolutely. So again, please check it out. That is the pick of the month. Eric, the pick of the month might actually even be silver, too. We're having a really solid week again in silver. Gold as we speak is unchanged. But hey, who's going to complain at 15.38 but silver is up a $1.10 on the week, now 18.51 as we speak, looking like it's on it's way to 20. What do you think this morning?

Eric: Well, I think the three most important things in the precious metals markets are silver, silver, and silver. I've been on this bench for a little while and I don't know if people watch, I've been a very busy guy in the sober space is hardly a day goes by that I don't invest something in some silver, mine some silver or body. It's just in my mind, the place to be. And here's why I get particularly excited by it. I'm looking at the physical-ness of what's going on in the silver market and I know you have lots of data and I have some data that important data to me is we've put 130 million ounces of silver into the ETFs. Now, 130 that's in about let's say two months. Let's say it's three months, three months. So if you annualize that, that's over 500 million ounces of silver.

We've produced a billion. We're supposed to use only 30% of that at most for investment. That's $300 million. The SLPs are collecting $500 million theoretically or on an annualized basis. That's just the ETS. Goodness knows, I see clean sales are exploring. For example, Sprott Money sales are up like 500%. I've heard of other guys that have had huge numbers of silver Eagles that are selling. We have the short position in the Colmex keeps going up. The short position on the Shanghai futures exchange with people should watch by the way, shfe.com to see what's going on over there. These short positions are massive. It's something like 650 million ounces of open interest. In China, we have a 1.2 billion, pushing 1.3 billion ounces open interest I. E. short on the Colmex short. How'd you like to be short that amount of silver with what's going on here?

I fully expect that we're going to see a forced measure on the Colmex as the price of silver start to really move here. And the price of silver will start moving the minute people realize that mathematically has to be a shortage. Okay? You just can't keep up this intensity of buying without there being a shortage. And is the buying going to a bait? Well, you tell me whether negative interest rates will get more and more bonds in the loop going forward? Because if you keep getting more and more things with negative interest rates, more and more people have to look at where do I allocate money? A paradigm shift that Ray Dalio referred to, and you need so little of people to decide to make a change. Precious metals are one half of 1% of financial assets. One half of one. What other guys says they're going to put 10% in silver?

So, these things are all pointing to very dramatic happenings in the silver market. The technical traders, people that I referred to back on me 31st when this whole thing really started going and we nailed it almost to the day are suggesting that silver will kind of hold in here around 18. And then sort of mid to late month September really put on a drive. Their targets are, and wait for this now, 35 to 40. Do you know how much silver stock go up when you go from $15 to 40?

Craig: Yeah.

Eric: Fifteen to 40. We're talking, yeah, it could be up a 1000%. Where did you get to make 1000%? These opportunities don't present themselves. And by the way, even for you and I. How about the UV index is already up 50% in the last 3 months. What did you make in the last three... Well, I made 50% in the last 3 months. Well, thank you very much. How difficult was it? You know what? WIt was as easy as one, two, three. And we got targets on gold and the two thousands, we've got targets on silver of 40. The gains are going to be so outsize. It's ridiculous.

Craig: Just a couple of other logs on that fire, Eric. One you mentioned all this pickup and demand. I'm looking forward to seeing India's silver imports because they are the kings of the substitution effect, always. If gold they think is too expensive, they start rolling into silver. Can only imagine how that might distort things in that demand category in the weeks ahead. And then lay this one on you. The September silver Comex contract went off the board yesterday. It's trading what we call first notice today. The amount of September silver contracts is by far the most standing for delivery in, well, at least all year. Going back, I'd have to check how far a couple of years, but over about 35 million ounces standing for delivery. And in the first delivery night yesterday, there were nearly 5,000 contracts posted and made delivery of remarkable amount and I think is indicative of something going on beneath the surface.

Eric: Well, it's interesting that 5,000 contracts is 25 million ounces. Okay? And again, I mean, we just talked about with the ETF. Well, what about the Comex? What if the Comex says 25 million a month? You know, there's another 300 billion, there's another 30% the same as the ETFs would be a, I mean, there's no room for it in silver. Silver is used industrially. The amount that's available for investment is probably 25% to 30% of all that's produced. I would further point out that one thing anyone could watch and look at the dollar value of trading and GLD versus SLV. And of course my big thing about silver, silver in the world's crust is 12 to 1, silver in production today is 10 to 1. Silver as a currency was 15 to 1. Now, wait for this number. The purchasing of SLV versus GLD with something like three to one yesterday, $3 into gold as versus $1 into silver. How can the price be 84 to 1? That ain't going to happen. So, there's so many things pointing to the fact that we should be going back to 15 to 1 silver. Well, 15 to 1, the that means that goes up by 500% even up gold stays steady state. That's the beauty of silver here. And of course all the physical data and all the trading data, everything is supporting that thesis. And, you know, the technical traders guys are suggesting this big target. They've been very, very good. So, lots to expect in the future here.

Craig: Eric, just one more ETF question. You mentioned the GLD. As we look at gold, now it's rather interesting over the last just a 7 or 8,9 trading days going back to Monday the 19th of GLD has added what they say is 37 metric tons of gold to their inventory. Now that was one of the questions that we had this week too. Somebody sent in, just said, "Hey, do you think GLD actually has all the physical gold they say they have?" How about comments on all of that demand and then your comments on that question?

Eric: Yeah. Well, first of all, let's deal with in the mass, it's roughly five times a day. You know, you've got 250 trading days at 1,250 tons a year. I mean, that in itself would represent about 30% of the gold supply. Which last year 18, it was probably negative. It's probably took money out of a GLD. I think they might tons out. They might've taken 200 or 300 tons out. Well, how can you have one party go from taking 200 out to putting, having to put 1200 and 1400 ton change and a 4,000 ton market and the price doesn't go up? Now, that's ridiculous. The price has to go up and you know what? They're going to be in fumes trying to find the gold, because there's lots of other ways that people buy gold as well. They buy the gold coins. There is more than GLD.

My God, I mean, think of what must be going on in China. They got a billion people over there, all of whom started off by loving gold. And the Indians have over a billion who started off by loving gold and silver. So, whoa, what would the numbers be in universally? They'd just be crazy. Now, whether or not the GLD has the gold, I do believe that under their mandate they can accept from one of their participants and the guy says, "Yeah, we'll sell you that." Now, when he's going to deliver it is a whole other point. Okay? We've got a contract saying you sold it to me, but have you delivered it to me? That's the real critical item. And we've been there before where, you know, we can see signs of stress on the physical side of things and then somehow, you know, they bought the commodities markets intentionally. In fact, there was an increase in the silver margin this week.. That didn't stop silver. And think of the losses that are taking place here. We got guys that are short $100 billion worth of gold that are down 25%, well, that's only 25 billion. We have got guys that are short, what do we got, about twenty billion worth of silver. Air down 25%, that's another 5 billion. Hey, when do you cry uncle, when do you cry uncle?

Craig: Yeah. Very good point. Hey, and I do want to get into a couple of the specific names this week, because we've got a little, another list, but time is getting a little short. But I also wanted to ask you though about some of the economic data. It was kind of a short week for that, but we did see some stuff today about especially personal income in the U.S. It's falling off a cliff. It was expected to be up four tenths of a percent. It was up one 10th of a percent. Anything else catching your eye before, you know, next week we'll get into the employment report and all that jazz?

Eric: Well, let me just go to personal income. As you know in the last Job's report, everyone talked to him about how wages were, whatever the number was, 0.2, 0.3. I said,"Yeah, but the hours worked were down." Okay? And the sum total of the report was income was lower. Okay? And how about this one? How about year over year? How much interest income is the consumer getting on this negative yielding bonds and all that crap? You know? So this, the fact that there's no interest to be earned anymore, like people, investors has an impact on income, and that's not getting any better. So, you know, and it's a bit of a problem when they spend 0.6% and their income goes up 0.1%. They must be borrowing the money and of course then it just, you're in the deep hole that you never get out. One other data point, I'll talk about car sales in India. India, an economy that's supposedly going 5 or 6% a year. Their car sales were down 36% in July.

Craig: Oh, geez. Oh, gosh.

Eric: That's a head scratcher, baby. I can't figure that out. And if somebody else can you tell me. Okay? That's a big decline.

Craig: Wow. Yeah. It is not just a U.S. phenomenon yet. The EU already seems to be in recession in the U.S. may be there as well. All right. Everybody listening, we always appreciate the feedback and we get kind of a laundry list every week of names, people wanting to know Eric's thoughts on certain minors, big and small. I can assure everybody listening, we discuss all of them before we begin to record. But if Eric doesn't have an opinion, if it's not one that he knows about, we just leave it off the list. Because we're already using too much time. We're already 14 minutes into this call. So he looked at it. If we don't address your specific name you sent in, it's just simply because Eric doesn't have an opinion at this time. So Eric, I've got a couple names for you though that I want to make sure we talk about. Somebody wrote in and asked about American Creek resources.

Eric: Sure. American Creek owns 20% of the treaty Creek or body. They're carried. They have the same interest as two ton. Two-door has the 60%. What has to fund all that relations and actually participate in the couple of issues in that company recently. I'm basically trying to get into treaty Creek. I'm hoping they'd come up with a 10 to 20 million outdoor buddy. That drilling has been very good so far. Fingers crossed on the subsequent results.

Craig: Somebody said GT Gold Corp has a big owner by Newmont.

Eric: Yeah. Now, I'm familiar with GT. I'm not in GT, but I think GT of course is in the golden triangle of BC. They've had good results. It kind of got away from me last year. I don't like to chase him. You know, I'm in the business of stealing here, so I want to buy him when the market's not kind of focused on it, but the market is focused on and I think they've done very well.

Craig: Could you give us an update on RNX? Royal Nicole, they had that gigantic Boulder of Inuk in and then not much has happened since.

Eric: Yeah, well a lot's happened. They had all sorts of stock issues and I kind of as, the listeners know, I didn't really like the fact that they committed to $50 million purchase of a mill and they didn't have the money. And of course, now of course they've got to raise the money and they had announced an issue this week at 40 cents a share. Like, I don't know why they wasted the 50 million on the mill. It was way too early for that. They should have preserved their cash and kept mining and... But I still like, I'm a great believer in the ore body. We'll have to wait and see how the whole mill thing plays out. Even though I'm a big owner, in terms of participating in things, I'm sitting on the sideline.

Craig: All right. How about a company called Nighthawk?

Eric: Nighthawk is a company that I have a small investment in. They've had very good drilling. Looks exciting. We just have to go release by release. Hopefully they'll come out with similar interesting results.

Craig: Couple more to go. How about Discovery Metals? You know, anything about them?

Eric: Sure. Sure I know about Discovery Metals. Well, you know, initially when I got on the silver train, I looked around for, "Well, who's got the largest ore body?" Oh, there's a company called the Lavonne Resources that I'd never heard of that had extensively a billion ounce of resources, silver equivalent, and it was trading at like 10 million market cap. I said, "Fine. I want to own 20% of that company." And, but then I realized that Discovery Metals already had a takeover bid in place for Lavonne. So I went to Discovery and said, "I want to buy it. I'd like to buy 20% of you. And when you acquire Lavonne, I'd like to be kept at 20%." So I own 20% of Discovery Metals, big silver. Imagine where it would be... I always led to thinking, I'd say you got a billion ounces. If $15 is worth, it's 15 billion of metal. At $40 it's 14 billion of metal that was trading at $10 million. "Fine. Sign me up."

Craig: Somebody had written in the last week about Kirkland Lake had a little trouble in the last quarter due to the rainy or some water issues down in Australia. And somebody said, you know, you often see this in companies, you know, these, once you become a major, maybe your production starts to slow down. Can you address the specifics there?

Eric: Sure. Well, the water problem with that, the Macassa Mine in Ontario, and all of it, there was so much rain. All of a sudden you get an influx of water into the mine. It's an underground mine and you don't have the pumping capacity installed to get rid of the water. So of course, it's a huge effort to bring in more pumping capacity because you had this excess rainfall and ultimately it's under control. I think they said in their conference call, it was under control by the end of the second quarter. I think the inference was made, they were back to normal in terms of production on the production call. So I suspect they'll have a good quarter at Macassar this year. Of course we're looking for better things out of Fosterville. And of course the other thing we're still waiting for is some kind of indication on one of two fronts, either the Fosterville front or on the McCaskill front that they're onto something big in terms of new gold discoveries and the castle, I feel actually more certain of today because they're already on the amalgamated break with good results. And hopefully they'll push that out. And of course it could be huge. It could be equivalent to the whole all 4 main break, which was 25 odd million ounces if it has the same kind of characteristics. And it's looking pretty good so far. Down in Australia, of course, we're looking for the next Fosterville. They haven't reported that they found it yet, but they geologically feel pretty comfortable about what they're finding so far.

Craig: Sounds good. And I can tell you what else sounds good, buying more physical, precious metal. I think Eric's made a pretty compelling case for gold and silver this week. Well, Sprott Money is here to help. You got to store that stuff someplace too. So open a storage account was brought money to storage, secure your precious metals. You can store precious metal at any one of our six global locations. Sign up for Sprott Money international storage, and also receive exclusive deals from us. So give us a buzz, (888) 861-0775 or, of course, go to sprottmoney.com for more details.

Hey, thank you for a great week and we'll talk to you next week.

Eric: Looking forward to it. That could be very exciting. You know, we're expecting a little quietness this week in the precious metals. But get yourself ready for things happening big time here as we approach again in September. Don't wait around. These things are not easy to buy. So...

Craig: Yeah, three day weekend this week. We got employment data at the end of next week and then the next fed meeting coming up two weeks from next Wednesday. So it's going to get busy. You're right.

Eric: Okay, Craig, you have a good one.

Craig: All right. You too, Eric. And from all of us at Sprott Money News and sprottmoney.com, thank you for listening. Have a great weekend. We'll talk to you next Friday.

Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities. Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.

The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.You may copy, link to or quote from the above for your use only, provided that proper attribution to the source and author is given and you do not modify the content. Click Here to read our Article Syndication Policy.

Mike Garcia 6 months ago at 11:56 PM
Can you ask Eric about Rio2 Limited next week. He recently financed the company
Éric 6 months ago at 10:17 AM
could you ask about: First Mining Gold Corp (FF.TO), Great Panther Silver (GPL) and Avino Silver and Gold Mines Ltd (ASM). Thank you! It really is appreciated.
Douglas Sweetman 6 months ago at 5:22 PM
If Mr. Sprott doesn't want to chase GT Gold, can we get a comment on Colorado Resources exploring the same resource next to Saddle North/South, but only at $15 million Cdn$ market cap?
Lynn 6 months ago at 4:40 PM
Hi. Can you ask Eric about Jaguar mining, Maple gold mining and McEwen mining...
Thank you
Daniel Statham 6 months ago at 3:04 PM
Befour Eric buys a stock what research does he go through to determine the correct ones.?
Brad Scott 6 months ago at 9:04 PM
Hi. Could you please ask Eric to comment on Excellon Resources. I was going to ask about First Mining Gold as well but Éric beat me to it.
Josh 6 months ago at 6:27 AM
Hi, Can you ask Eric about international tower hill mines?
Richard 5 months ago at 11:55 PM
Hi Craig, Could you please ask Eric if he has an opinion on a company called Prophecy Development Corp who are looking to develop an existing historical silver mine in Bolivia. Much appreciated. Thanks & Regards. Richard.

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