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Why the Bounce-Back in Metals Could Mean a Strong End to the Year - Weekly Wrap-Up (Nov 1, 2019)

Why the Bounce-Back in Metals Could Mean a Strong End to the Year - Weekly Wrap-Up (Nov 1, 2019)
By Craig Hemke 18 days ago 19429 Views 5 comments

Nov 01, 2019

With just two months left in 2019, where do precious metals go from here? This week on the Wrap-Up, Eric Sprott takes a deep dive into the numbers and gives you all the gold and silver news you need to make sense of it all.

Listen to hear:

Why you can’t trust the numbers coming from the government

Which metal is about to start “flying”

Plus: the reimposition of the uptick rule and Eric’s thoughts on the shares

“We had a nice rise here. We got through the 50-day moving average. We broke the downtrend, I think, in both metals. Until the jobs report today I would have thought that we would have a pretty significant run forward here. And we may yet have it, even though the jobs number came out and was supposedly better than expected. You know I’ve never believed the jobs report. Ever.”

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.

Transcript:

Announcer: You are listening to the "Weekly Wrap-Up" on Sprott Money News.

Craig: Well, hello again from Sprott Money News and sprottmoney.com. It's Friday, the 1st of November, just 2 months to go in 2019. This is your "Weekly Wrap-Up." I'm your host Craig Hemke. Joining us again this week, Eric Sprott himself. Eric, happy November.

Eric: Hey Craig, glad to be here. Lots of interesting things going on in our world because some stocks are beaten and going up nicely and some stocks are not beating and they're going down significantly. And gold's acting well, silver is acting well. So, lots of interesting things going on.

Craig: We have a lot to talk about, no doubt about it. And we have something interesting to announce this week. Not the usual stuff. This is something new for people. Please pay attention. For all of you listening today, I want to let you know of a special event coming up in Winnipeg. All right. So, you got to go north of the border, if you're in the U.S. But this will be in Winnipeg. Sprott Money is co-hosting along with the CCMEC, a client appreciation event on Sunday, November the 17th from 6:00 to 8:00 p.m. called The Art of Discovery, at the Winnipeg Art Gallery's Inuit Art Centre. You can enjoy a reception of wine, hors d'oeuvres as special guests as you take a tour of the wonderful collection of Inuit art on display, much of which was kindly donated by the Sprott family. The reception is free, but space is limited. So, you need to RSVP, if you can make it to Winnipeg on Sunday, November 17th. You can visit sprottmoney.com to register and learn more. It's a great warm-up for those of you attending the CCMEC Convention the next day. Again, just go to Sprott Money. It's free. Hey, we gave away a little bit of Eric's gold a couple of weeks ago. And now we're giving away some Eric hors d'oeuvres.

Eric: And art.

Craig: How about that? I like it.

Eric: Yep.

Craig: I didn't know you were a big collector of Inuit art.

Eric: I am...was a very, very large collector of the Inuit art and I gave most of it to the Winnipeg Art Gallery when I sort of officially retired because it was in the office and it was mine. What am I going to do with this stuff? So, that seemed like a very nice place. There's a big First Nations population out there. So, I thought that was a great spot for it.

Craig: That's very, very cool. My friend, what also is very cool is the bounce back we had in the metals this week.

Eric: We had a nice rise here. And we got through the 50-day moving average. We broke the downtrend I think in both metals. Until the jobs report today, I would have thought that we would have a pretty significant run forward here and we may yet have it, even though the jobs number came out and supposedly it was better than expected. You know, I've never believed the jobs report ever. Particularly when...like last year, I think for 19 up to September 30 or something like that, whenever they cut euro, they just eliminated 500,000 jobs halfway through the year, you know because of some revision that took place. So, you never know how real these numbers are. I'm actually looking forward to reading a book by Robert Kiyosaki called "FAKE" because when I look at a lot of the stuff that we're asked to devour, I get the sense that a lot of it is...it got a little bit of a BS component in it and everyone wants to make the world look like it's better. But it's not really getting that much better.

And in fact, some of the real surveys, the ISM, the PMI, the Chicago, the dah, dah, dah, I mean, the numbers are rotten. The consumer comfort, consumer confidence, like man, we're in a downtrend. And I think one of the guys that you interviewed, David Jensen, said, "Hey, money supply have been going down and we're going to have a decline in economic activity." And it's happening. So, I think that's what we have to look forward to for the next 12 months.

Craig: No, you're absolutely right. The data is miserable. The fed is allegedly data-dependent and they cut the fed funds rate again this week and gave no indication that that trend is going to reverse. And Eric, there's a constant demand for more and more dollars to service all of the existing debt. I don't see how it can ever reverse.

Eric: No, it can't. And you know, one of the other things that I greatly believe in and I believe in it for the world, okay, is that the underprivileged, the people who are in the lower half of earners, they keep facing inflationary pressures, but their income doesn't go up. And I'm reminded, I was reading about the Halloween candy, I think it went up 3.9%. Okay? Well, a guy who had a job making $50,000 has to spend as much on Halloween candy as somebody making $100,000. And you know, he just gets squeezed. And that's not just in the U.S. or Canada that it's happening. It's obviously happening in South America here. I mean, you see these countries where some guy says, "Well, I want to raise the transit fares," or something and there's a revolt or, "I want to raise gas prices because we can't take anymore." They know it. They're already delinquent on their credit cards or their payments and getting bills in their mail saying, "You're overdue and all that." That's throughout the world. Okay? That's just the way it is. And you know, "We can't take anymore." I don't know why I'm expressing it that way because I can handle it, but I know what they're...I have a sense of how people are feeling about it. It's endless.

Craig: Precisely.

Eric: So, there's not much uncertainty as to where we're going here.

Craig: Eric, you know, an exact example of that fake as you said, I remember Jim Sinclair used to call it "MOPE." Remember that? "Management of perceptions."

Eric: Yeah.

Craig: We had the GDP numbers in the U.S., the first guess of the third-quarter GDP and that came in magically above expectations as well. But of course, what they're quoting is real GDP, which is adjusted for inflation. Well, if you can understate inflation, then you get a positive number, right?

Eric: Yeah.

Craig: So, they come in at 1.9%, but if they'd measured inflation, just 1% higher, it would have been 0.9%. I mean, all these stuff [inaudible 00:06:09].

Eric: And how about they did inflation, right, and said, "Inflation is 4%, not 2%?" There would've been no growth.

Craig: Right.

Eric: And that's the whole crux of the matter mathematically. You know, we know inflation's way beyond 2%, way beyond that. And the average guy...I mean, look at rent increases, and the cost of a house, and the medical bills, come on. You know, you don't have to...you can be half-awake and figure this stuff out.

Craig: If you are this week, which is...I'm just teasing you.

Eric: I'm fully awake this week. Yes, I am.

Craig: Fully awake this week.

Eric: Thank you for reminding me.

Craig: All right. Let's move on. We got to talk about the situation on the COMEX, which is the primary price discovery spot for the world anymore. And every evening, we get a preliminary report that is then finalized, the numbers never match up. That's probably a topic for another day. But anyway, last evening on the big rally out of the FOMC yesterday, we saw on the preliminary report, open interests rise 34,000 contracts to 682,000 blowing away the old all-time high, which was actually just a week ago at about 660,000. I suppose you have some thoughts on that.

Eric: Well, it's mind-boggling. You know, we had a 5% increase in the open interest on a roughly $15 rally, 1% rally in the price of gold. And the thing I find just so frustrating with the COMEX is that every contract that is bought by a person who thinks the price of precious metals is going higher, one for one is sold by a commercial bank. It's just the way it is. Okay?

Craig: Yep.

Eric: So, you know that if the short position went up by 34,000, it's 34,000 contracts sold by the commercials and bought by people who recognize what's happening and say, "Oh my God, this has got to be a great investment, both gold, and silver." And we, again, referring to David Jensen, we got to get into a palladium-type situation, where the guys on the floor know that the paper game's over and they can't stop it anymore. And I suspect that we may not be that far away from it in silver. Ted Butler's writing about the silver whale coming back and then buying another, I think, it's 100 million ounces. He's speculating here. But you know, you keep taking this out of the system and other people in the world focusing on, okay, where do I put my money as my local currency's getting trashed? Okay? And most local currencies, i.e. whether it's the rupee, or the Brazilian whatever, or the Argentinean this or that, oh my God, have they've gone down in value, how do you save yourself, gold and silver?

Well, hey, why don't we all act like the Indians, instead of buying gold, they start buying silver by humongous amounts, where they now consume about 40% of the silver in the world? So, you know, it's just going to take a few more people going there and we're going to be flying in here. And I think particularly in silver.

Craig: And Eric, it just gets to the fundamental flaw in the fraud of the pricing scheme in that, you know, if it was an equity and there was a rush of demand to buy it, price has to move up until people that currently hold it are willing to sell it. And that sort of happens a little bit in gold futures. But also, the banks just simply supply more contracts, they create them from nothing. So, price doesn't have to move up. You don't have to find willing sellers. The banks just create new ones and shove them out there.

Eric: Yeah. Yeah. Well, it's interesting. There was an article that a former governor of the CFTC was giving a speech and he said that between the treasury, the fed, and I guess, the CFTC, they started bitcoin futures to end the rally in bitcoin. And we know that, you know. And the day the future started, it was over for bitcoin. And of course, we see it happening every day in gold and silver. We know exactly what goes on, that the pockets are so deep, and so careless, and so stupid. They'll just do anything to have people believe in the fake thing that they want them to believe in. And so, yeah.

Craig: And Eric, that was the former head of the CFTC, Giancarlo.

Eric: Yeah. Right.

Craig: Unbelievable. So, Eric, people always ask me, I mean, can we acquire enough physical to break it? I mean, because that's clearly the only way it's ever going to fail. I mean, what else can be done?

Eric: Yeah. Well, we certainly can acquire enough silver. So, let's say there's 2 billion ounces around $3.6...sorry, $36 billion to buy it. Okay. Thirty-six billion dollars in this day and age is not a lot of money. You know what I mean? Like, if some major institutions decided to go in and buy this stuff, I mean $36 billion might be a drop in the bucket or some central bank. How about the Mexican Central Bank?

Craig: Or Putin.

Eric: Let's just step in there and buy the $36 billion tomorrow. We're the biggest silver producer in the world. Why don't you do what's right for your countrymen and buy the goddamn silver?

Craig: Yeah, yeah. Or Putin. You know, everybody thinks he's... Yeah.

Eric: Or Putin. Yeah. Forget the gold for a month. One month. Yeah.

Craig: Well, all right. My friend, it's an interesting time, that's for sure. But price does look good. I mean, let's not get away from the main point. We began the year at $1280 in gold, we're now north of $1500. We began the year in silver $1550. We're up here $1800. They're both up 20%. That's the best year we've had since 2010. So, I suppose we should probably keep our eye on the ball.

Eric: We're looking a lot better here. And I think notwithstanding, you know, we're looking at a day when gold's down because of some jobs report, but I mean, that'll be illusory after a while. And we'd probably end up right back up there again. I did wanna mention two things that I found very peculiar. The World Bank has suggested the price of gold is going to $1,600. Now, I don't know why the World Bank does that, but there you have it. Okay? The World Bank coming in. Okay. And then the World Gold Council comes out with a report saying, you know, people should take 1% to 1.5% of their bond portfolio and put it into gold. Well, of course, if it was 1% to 1.5% of your total fund, that would increase the demand for gold by 200% to 300% gold equities. Because it's only one half of 1% of people's holdings right now. So, if you want to get to 1%, you got to double, you want to get to 1.5%, you've got to triple. So, I found that was a very interesting study. So, hopefully, those...I find it interesting that those organizations are sort of getting behind gold here now. So, it was very constructive.

Craig: Yeah. Why would you not swap into some gold when you've got a negative-yielding bond on your hand?

Eric: Exactly. That was exactly the point. And really negative...not only is it negative-yielding, in real terms, imagine how negative it is. Imagine if you're getting minus a half actually for the bond and then your inflation was really 4%, you're losing 4.5% purchasing power per year.

Craig: Yep. Exactly.

Eric: And gold's up...what did you say it was up this year by?

Craig: Twenty.

Craig: Oh my God, 20%. Okay. Let me see. I could lose 0.5% or make 20%. Oh, that's a tough, tough one.

Craig: Yeah.

Eric: Okay. Let's move on.

Craig: All right, my friend. Anything else on your mind before I ask you about a few shares?

Eric: Oh, yes, there was one other thing. I want to talk about the reimposition of the uptick rule. I had a group of people come to see me and say, "You know, we're going to push the TSX Venture Exchange to reintroduce the uptick rule on short-selling." There's nothing I would believe in more than that. This ability of people just to smack stocks down is so discouraging, is so unproductive except for the guys doing it. It's so unproductive for the customers of the TSX Venture Exchange. Okay? And they should review that. It's unbelievable that they got rid of that rule back in 2012 and I got to really fight hard to get it re-instituted.

Craig: How do we do that, Eric?

Eric: How do we do it? We've got to embarrass some people. We've got to prove to them that, you know, the ultimate consumers of your product are people, people, not people...companies trading securities against you. They're providing nothing. They just eat your lunch every day. And make the amount of money that we can invest in a good company, smaller every day.

Craig: Right. Just taking, they're just taking.

Eric: They're just taking and giving nothing.

Craig: And in the meantime, these companies have real employees with real families and they're trying to do a real job.

Eric: Right. It's ridiculous. It never should've happened, ever, ever, ever.

Craig: I like it. We'll keep us posted on whether you can get that done up there.

Eric: Will do. Okay.

Craig: We have a couple of names that came in, a few that we've talked about before. I know Eric doesn't have an opinion on things like BTU Metals or Greatland Gold. We don't know anything about those, Pretium. But I do have a couple that I know Eric's got some thoughts on. Eric, let's start with Brixton Metals.

Eric: Sure. Well, first of all, I know Pretium. Okay? But I'm not intimate with it. I know they had a lousy earnings report and it was one of the stocks that got beat up just yesterday. But I'm not a student of it, is probably the best way of putting it. Now, Brixton, I am an owner of Brixton. And the stock was up sharply yesterday. They had a drill result that came out, I think, the day before. It looked okay/good. But they have another nine holes and I suspect with the kind of move it had yesterday, well, you know what, maybe one of those holes was pretty stunning. I don't know. We'll see. I don't have a reason why it went up almost 20% yesterday, but it's nice to see. That's Brixton.

Craig: Eric, you might have a Jaguar in the garage. Do you have any opinion on Jaguar Mining?

Eric: Well, I should have an opinion. Let me see. I own 45% of it, so I guess I should know a little about it. We refunded the company recently along with another major investor, Hathaway, John Hathaway. The production for the quarter I think is going to be sort of not special. I mean, I think it's going to be like 18,000 ounces, something like that. But with what they have in line in terms of the funds available for them to get the development started a little further ahead, get new equipment, you know, I'm hoping that, you know, by the end of next year, we could be looking at a company that instead of producing 80,000 ounces a year, might be producing 100,000 ounces a year. And if they can produce 100,000...I mean you get the extra 20,000 for free. So, it would make a big, big difference. I think the stock is...obviously, I am a believer in it. But I'm biased, so we'll just leave it that.

Craig: How about Discovery Metals?

Eric: Well, I bought Discovery because they bought a company in Levon that supposedly had a billion ounces of silver. And of course, you know, you could see the emotion I speak to on silver here. I just find it incredulous that it would trade at 83 to 1, incredulous that it would trade at that. There's just no way on this earth that it...but there's one way. You know, it's just the guys on the COMEX don't care what the price is and sell it, sell it, sell it, sell it. And who cares about these relationships? You know, that's for another day. But as I say, I hope silver will do what palladium's doing, where people recognize that there's going to be a bit of a shortage here. And I see big things for silver and if a guy's got a billion...Levon was taken over by Discovery Metals. And between that property and other properties that Discovery has, most of which are silver-oriented, it could be a great silver asset going forward.

Craig: And lastly, any extra thoughts on Wallbridge? We discussed that last week, but what else do you have?

Eric: Well, you know, I spend a lot of time looking at these things and the more I reflected on that drill hole that they had announced about two weeks ago that, that was a drill hole in one of their northwest-southeast structures. They have a number of northwest-southeast structures, one of which had an intersection, I think it was 17 grams over 11 meters. Okay? Which again, is a great hole. And of course, the whole question is, well, do we have a whole bunch of structures that go a kilometer long that as we go deeper, the width is expanding and the grades are improving? And I would remind the listeners that Wallbridge when they were doing some of their drilling up in the discovery zone, I mean, they were getting a hundred...what I call, triple-digit grams over fairly wide widths up there. Which you're saying, "Well, I guess, it shouldn't be that unusual that you would have good grades down below." The grades up top had to come from somewhere and they don't come from above. They come from below.

So, you know, this, I'm hoping, really hoping it could be, you know, some multiple of 10 million. That's what I'm kind of hoping here. And the question is, well, how many multiples of that will it be? We'll see.

Craig: Wow. All right. Well, before we wrap up, just another reminder, if you missed it at the beginning. This is a free deal, stop by Sunday, November 17th for the special event that Sprott Money is co-hosting in Winnipeg at the Winnipeg Art Gallery. Sunday, November 17th. All you got to do is go to sprottmoney.com to RSVP. While you're there, hit the Deals tab on the Sprott Money homepage. You'll also find that we are still in the midst of the Sprott Money autumn sale, all kinds of great, great pieces of bullion and coins on sale to add to your stack. Because that's the only way we're going to defeat these banks as we've discussed, is through physical metal. Eric, thank you for your time, very much appreciate it. I hope you have a good weekend.

Eric: I'm sorry I got so emotional, but you know, I am a little bit involved. So, anyway, I hope you have a great weekend too.

Craig: No reason to apologize, my friend. From everyone here at Sprott Money News and sprottmoney.com, thank you for listening. We'll talk to you again 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.

Roger 18 days ago at 12:28 PM
Hi Craig/Eric,
I went to the Silver/Gold Summitt in San Francisco. MAG silver says it will be pulling out high grade silver out at a cost of 5 dollars a ounce in the near future. They have only 8 employees and claim they will be the number one silver producer in the world at some point. Would love to hear your thoughts on this company. Thanks! Roger
Wayne Johnson 18 days ago at 12:50 PM
Hi Craig and Eric,

This morning I was listening to the Weekly Wrap Up. As you talked about jobs and unemployment and inflation, I thought about the realities of North American poverty

ARE THE FOLLOWING PEOPLE INCLUDED IN THE UNEMPLOYED AND JOB NUMBERS?

If unemployment and inflation numbers are so low, why are
• 40+ million people getting food stamps in the USA
• 850,000 use food banks in Canada each month
• 15% of Mississauga (right next to Eric’s house) residents live in poverty.
That’s over 100,000 people. The Mississauga Food Bank wants to make sure none of these neighbours have to go without nutritious food to feed their families.
• Why is Food Bank use in Mississauga up by 18% This year alone? http://www.themississaugafoodbank.org/wp-content/uploads/2018/09/Face-of-Hunger-Report.pdf

USA – from Wikipedia
The Supplemental Nutrition Assistance Program (SNAP),[1] formerly and commonly known as the Food Stamp Program, provides food-purchasing assistance for low- and no-income people living in the United States. It is a federal aid program, administered by the United States Department of Agriculture, under the Food and Nutrition Service (FNS), though benefits are distributed by each U.S. state's Division of Social Services or Children and Family Services.
SNAP benefits supplied roughly 40 million Americans in 2018.[2] Approximately 9.2% of American households obtained SNAP benefits at some point during 2017, with approximately 16.7% of all children living in households with SNAP benefits.[2] Beneficiaries and costs increased sharply with the Great Recession, peaked in 2013 and have declined through 2017 as the economy recovered.[2] It is the largest nutrition program of the 15 administered by FNS and is a key component of the social safety net for low-income Americans.[3]

Canadian Food Bank use – from Huffpost
Shockingly, more than four-in-ten Canadians don’t believe there is a food crisis in Canada, yet, nearly 20 per cent know someone who uses a food bank regularly. In fact, over 850,000 people across the country turn to food banks for help each month; and more than one-third are children and youth.1
The 2018 Catelli Feed the Hope study also found that there are many misperceptions surrounding food bank usage in Canada:
• The Food Crisis is Real in Canada: One-in-three Canadians would turn to a food bank if they experienced sudden money problems (33%) or a lost job (30%).
• A Hungry Generation? Millennials (age 18-34) are significantly more likely to turn to a food bank after experiencing sudden money problems or a lost job.
• Reasons to use a Food Bank: One-third (34%) of Canadians believe poor money management is the top reason people use a food bank, while one-in-five (21%) Canadians believe the top reason people use a food bank is because they are taking advantage of “the system”.
Thanks
Wayne

A KL shareholder since $7.05 Cdn. Thanks
Theodore L. Hake 18 days ago at 8:36 PM
Enjoyed the interview. Mr Sprott is always engaging and informative. Thanks
charles collier 17 days ago at 9:21 AM
I just want to throw something out there for discussion. Yes, it certainly seems as though the commercials/bullion banks are shorting the hell out of the COMEX gold complex with new all time highs in open interest and that they will win as usual. BUT, just maybe, more than a few of the mining companies are hedging production in volumes not previously anticipated. I own Detour Gold and recently checked their hedging position and found out that 45% of production is hedged through 2020. What if the miners are primarily responsible for the spike in open interest which would partially explain why gold has held up reasonably well over the past six weeks. Here is where my theory get's interesting. If what I'm thinking has any basis in fact then maybe the bullion banks could become an ally in a move higher and in forcing the miners to cover at higher levels. So my question is is there anyone that monitors the level of mining hedges? I realize that I am probably totally wrong and that the bullion banks will win again as per usual but if there a kernel of truth in the above then there could be an explosive move at some point. Maybe you can discuss this topic in a future interview. Thanks
Brad Scott 13 days ago at 2:15 PM
I wonder if Mr. Sprott could comment on First Mining Gold. I believe that he owned it when it was First Mining Finance. It appears that the PEA for their Springpole project is worth more than seven times the current valuation for the whole company, while they continue to expand their Goldlund project with great drill results.

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