Weekly Wrap Up

Precious Metals Take the Escalator Up, Elevator Down - Weekly Wrap Up (Sep 25, 2020)

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It’s been a remarkable week for precious metals investors—and not in a good way—but here’s some positive news: there’s no trading over the weekend. In this edition of the Weekly Wrap Up, host Craig Hemke and legendary investor Eric Sprott break down all the gold and silver news you need to weather the ups and downs, including:

  • Why you should be suspicious of what’s going on in the markets
  • The “huge economic mess” and the damage done by Covid-19
  • The good news coming in the precious metals sector

“I thought I should preface all of my comments by a famous quote by Chris Powell. And he made the statement that ‘there are no markets, just interventions.’ And I think nothing could be further from the truth. By the way, he made that in September of ’08. And what a prescient comment, because all we ever see are people, in essence, interfering with the markets. Whether that’s going to be the Fed, with buying more bonds, or the stimulus that’s going to come in here… there’s very little that’s not touched by one group or another.”

To hear Eric’s full thoughts on the week’s gold and silver news, listen here:

Announcer: You're listening to the weekly wrap up on Sprott Money News.

Craig: Well, happy Friday from Sprott Money News. It's sprottmoney.com. It's Friday, September 25th, 2020, and it's time for your weekly wrap up. I'm your host, as usual, Craig Hemke. And joining us, as usual, is our friend Eric Sprott. Eric, good morning.

Eric: Craig, good morning. I sort of stopped myself when you said happy Friday.

Craig: Right.

Eric: There has been very little that's made people happy here including today so far. So let's see where we're going to take this.

Craig: The best thing about the weekend, Eric, is nothing trades. So we don't have to watch things going down on Saturday.

Eric: We get little time to get our breath back again and try to straighten things out.

Craig: Right. Exactly. Exactly. And, you know, we're going to talk a lot about price today obviously. If you recognize that we are in a bull market and that the conditions driving price are only going to continue and get more extreme in the months ahead then it's time to think about acquiring some physical. One of the questions you might have in acquiring physical metal is where do I put it? Where do I hold it? And that's where we got to start talking about where do you store your precious metals, and some countries are more ideal than others. Here at Sprott Money, we partner with the most secured reputable vault services around the world. So please feel free to call us at 1-888-861-0775 should you have any storage-related or any other questions. Every day we are trusted to store millions of ounces of bullion with one of the best storage rates you're going to find. So again, check it all out at sprottmoney.com. Eric, again, it is been a remarkable week and just another example of the metals taking the escalator up and the elevator down. And I'm sure you've got some thoughts on that.

Eric: Sure. Well, you know, I thought I should preface all of my comments by a famous quote by Chris Powell. And he made the statement that "There are no markets just interventions." And I think nothing could be further from the truth. By the way, he made that in September of '08 and what a prescient comment because all we ever see is people, in essence, interfering with the market whether that's going to be the Fed with buying more bonds or the stimulus that's going to come in here. I presume that everyone is going to start buying stocks again because there's stimulus, but there's very little that's not touched by one group or another. And, of course, one of the groups that can also intervene is any cabal of banks operating in concert. And, of course, you know that I think they act in concert particularly when it comes to the metals, but I would also say this, when you look at what happened to the whole options market a month ago everybody and their brother was buying options so much so that the banks who normally write the options were almost crying, uncle. And here we are, mysteriously as we get to quarter-end, "Oh, none of the options are worth any money."

Craig: Right.

Eric: So in other words the banks have made all of the [inaudible 00:03:18]. The stock market has gone down, of course, commensurately. We've seen the action in metals. The dollar has mysteriously gone up. I mean, I can hardly believe I read negative things about COVID and the stock market going down, and the US dollar is going up. Like the sense of logic to me is amazing but then again, the banks were the guys who were longing the dollar because everyone was shorting the dollar. And here we are within days of quarter end and miraculously the dollar goes up. So I'm very suspicious of all that is taking place here in the markets.

Craig: As you should be. No doubt about it. And, of course, you know, you and I for...well, you for longer than I, but at least for the past decade at my side, we've been called what, tinfoil hat, conspiracy theorists, people that don't understand the markets. And so, therefore, all we can do is call a manipulation. Not that it means much, it's, you know, a drop in the bucket, it's only a fraction of the profits they've made, but we did get JP Morgan to accept a $1 billion fine this week for manipulating the price of gold.

Eric: Precious metals. Yes.

Craig: Well, and silver. Yes.

Eric: Yeah. Yeah. Yeah. And add probably platinum and palladium while they're at it, by the way.

Craig: Sure. Why not?

Eric: Leave no stone unturned, you know.

Craig: Right. There's money to be made.

Eric: Yeah. And, of course, to put it down to spoofing, I mean, that's the biggest joke of all time. Okay. I mean, yes, the Department of Justice and the CME want to ascribe it to spoofing. Those of us who've been around for long enough know it's not just spoofing, man. It's weeks like this when things just crash all of a sudden. That's not spoofing. That's just manipulating the market. And it's always distressing having been there, own these things, to know that day after day and, of course, it was even more worrisome to me that Bank of Nova Scotia up here paid a fine for doing the same damn thing. And you're working in that market trying to survive and trying to be rational and you've got guys working against you every minute of the day.

Craig: Yeah. Well, and you know, it was the same old tried and true technique we've seen. I've just seen it countless times now and I'd invite anybody to do this. If you can go to any type of chart site like barchart.com, something like that, pull up the price of gold and plot it with the 50-day moving average, you can see it with silver too and price was pinned against it for about two weeks so that everybody was watching it. And then all of a sudden it gets smashed through there. All the stops get run. I mean it's an old trick. They've used it for years.

Eric: Yeah. One other thing we probably should talk about is the whole state of the stock market because, you know, there's many stocks including, I know Tesla and Apple that are in bear markets. And it looks like we'll have another big down day here today. So it should concern everyone where we are going here. And, of course, I read a report today, "Well, I guess the Fed will have to step in here because they can't have markets going down." And I presume that might happen and, of course, that would be good for the precious metals just to realize, here we go again. Throw more money at it. But there's lots of people out there including the IMF who basically said, "We're not getting back to pre-2019 levels. Not for five years." And I have developed a new view of COVID-19 and the view I have is that this is not nearly as dangerous as people are making it out to be because the deaths are not rising. For example, in Canada, Canada we had six people die yesterday. Six.

Craig: Six.

Eric: There's more that die from suicide in a day than that.

Craig: Sure.

Eric: There's more dying from 20 like different things because 1500 people die every day. And the fact that you shut down your economy because six guys died. Over in Thailand, for example, zero deaths. It's amazing to look at some of these countries that somehow seems way more capable of dealing with this than others. In fact, I would even contrast the example, Canada with the United States. I mean we are doing way, way better than the United States. And I can't imagine that we act differently. I mean I sort of put it down to the lack of preparedness because other countries have done a much better job. But my concern is that we are so overemphasizing this COVID-19. What are the negative results going to come out from being in a depression and how many people will be committing suicide when they lose their businesses? Has anybody thought about that yet? So anyway, I think it's too overhyped here. I think we can see our way through it, and I don't think the death rate is going to be anything like even a guy like me would've imagined six months ago.

Craig: But as you said, the damage has been done. And, you know, in a sense Eric, don't you kind of feel like we've all been the proverbial frogs in a pot because the market has been going down with the dollar going up for the past week because Powell was perceived as being not dovish enough a week ago. He's doing $120 billion a month in QE and has promised zero rates for the next 3.5 years. A year ago, as recently as, you know, this January, that would've been crazy. And yet now all of a sudden that's not dovish enough and everything goes down.

Eric: And I think everybody realizes including maybe even the politicians now that we are in a huge economic mess here. And, you know, whether or not more stimulus is the answer, I have no idea. I mean, didn't I read that the death per capita in the United States, the federal debt is over $200,000 per person.

Craig: Probably.

Eric: Per capita. Yeah. Per capita. So in a family of four, that's $800,000 at the federal level. God knows what it is at the state and municipal level, but I mean it's just, you know, we're going to make it worse again with more stimulus here. So I don't know that the market has got to start thinking past the supposed V bottoms. You have an election coming up. Goodness knows what's going to happen as a result of that election.

Craig: Right.

Eric: That's a scary, scary thought no matter who wins. The other side is going to be I'm sure quite hostile about it. So I think owning stock is a risky situation these days.

Craig: And owning gold, not so much. And I'm sure we should just reassure it, for what it's worth, I've never sold an ounce of gold or silver in my life. All I've got is all the original stuff I've been buying for more than the last 10 years. Haven't sold any this week. I don't know about you Eric, but your stack is probably just as shiny as it was a week ago.

Eric: Never been touched.

Craig: Right.

Eric: Never been touched on the sales side.

Craig: Right.

Eric: And it's something that's done well. I mean I started buying it when it was like $260 in 2000. So I'm not hurting. And silver, probably buying that at $5 or something like that way back when. So everything is okay, and I still love the idea of these stocks. And we're going to get some great earning reports coming out here. We might get more dividend announcements, hopefully. So I think we have some good news coming in the precious metals sector.

Craig: Well, let's start with that. We had a couple of questions this week and again thank you everybody for sending them in. We had something like 85 this week. We can't get to all of them obviously, but we try to pare it back to some of the ones that were maybe repeated or more popular. And a couple of people were asking about dividends. In fact, we recorded the "Ask the Expert" segment here at sprottmoney.com. It will be posted probably early next week with Rob McEwen, legendary investor and founder of Goldcorp. And this was a question that Rob addresses well. Is it a good thing for these big producers that are just flushed with cash now, is it a good thing for them to be increasing dividends? Does it draw a lot of attention institutional money or should they be doing other things with all that cash?

Eric: Well, it's a very difficult question to answer because the history is that the company has wasted their cash from the previous time that we had wonderful prices. So the market is very gun shy on M&A transactions. And I think in order to calm your shareholders' nerves, a dividend will pay off handsomely in terms of supporting the valuation of the company. If I had my druthers, I'd rather see people put money in the ground because putting money in the ground can have, obviously, staggering paybacks if you're a good explorer. So that's what I would prefer to do rather than just pay the dividend or for a guy like me, I don't mind receiving a dividend. I'll put the money back in the ground.

Craig: Right. Exactly. All right. We had a number of questions this week about Garibaldi and Eric has promised us, that's one we haven't talked about for several weeks. He's going to do some research on that this week and will follow up with Garibaldi next week. I also had a lot of people asking about some of the majors and what Eric's thoughts are, companies like Hecla and Agnico Eagle. I think Eric you said in the past that's just not where you focus because that's not where the big returns are.

Eric: Yeah. It's not typically where I would go. I would always like to get a smaller camp company and hopefully, you know, buy something in $50 million or $100 million that can go to $1 billion, and therefore you're making 10 to 20 times in your money. It's harder to move the big stock. And, of course, the history of the big stocks is they don't move as much. So it's been a policy that's worked very well for me to stick with the small and medium cash stocks.

Craig: That's one way to put it. It's worked very well for you. I would say yeah. I think it probably has. Not for everybody obviously. I certainly have my share of big ones that are all going to...sure we think we're going to report pretty good earnings here coming up at the end of next month and early November. Some of the smaller ones that have been moving lately that I know people are dying to hear updates on, Discovery Metals like all the rest with silver coming down $5 this week, Discovery Metals has gone down. You suspect that's the reason?

Eric: Absolutely. It's a silver price and all of a sudden, the price has gone way up and lots of people do sell for reasons. Lots of people who own gold stock might also own things in the general market and things in the general market are all going down. So you can see that there can easily be a spillover there.

Craig: Yeah. Another one, I'll share this with everybody, I mentioned to Eric as we were getting warmed up, I said, "Oh, Ely Gold Royalties is now under a dollar." And Eric said, "It is?"

Eric: That's one of the benefits of not looking every day. You don't realize how badly you're getting trounced, but I'm shocked that it's there. I'll tell you one thing, when they turned, which I think will be before month-end, by the way, i.e. in a few days, typically the royalty stocks lead the parade. I mean in my mind the fundamental for Ely have gotten much, much better because Wallbridge is looking much, much better. I mean the size of the deposit just keeps going up. And if you're sitting there with a royalty, man you're laughing. This could just become a cash machine. So that's why I bought Ely in the first case and there's no reason for me to think that it's not worth what it was worth when it was trading at its high. So I suspect things will come back around here for that company.

Craig: It's like, you know, we talk about the rising tide lifting all boats sometimes. Sometimes when the tide ebbs back out, all the boats drop too.

Eric: Well, the stocks that always go down the most typically are the ones that were not the most because most everybody that owned it has a profit. And it's very easy for people to decide to sell those things.

Craig: Right. Right. All right. And then just two others. Freegold, we talked a little bit about that last week, but I know you want to mention that one again.

Eric: Yeah. Just reflecting on that second hole and the more I reflected on it and it was 150 meters step out and it was a wide, wide hole, 237 meters. Geez, that's going to get a million out very easily here. And I think Freegold Ventures has an easy shot at 10 million ounces. And 10 million ounces should be worth somewhere between $500 million and $1 billion. So with the market cap at $300 Canadian, there's lots of room there. And believe me, I won't be stopping it at 10 million ounces either.

Craig: Yeah. Didn't you say once that there's someplace in Alaska that's close to Juneau or Fairbanks or someplace and infrastructure is good?

Eric: Oh, my God you can drive through the orebody.

Craig: Yeah. So it's not like you're in the middle of nowhere.

Eric: No. There's another mine five miles away. Kinross has a big mine up there five miles away. No. No. It's got everything.

Craig: Okay.

Eric: It's going to be easy.

Craig: And then lastly, a lot of folks clamoring you had actually when you couldn't appear with us two weeks ago you called me and said, "Hey, make sure you point out to everybody how great Tudor's results were and some of the drilling results." And then Ken Konkin gave a presentation this week, virtual Precious Metal Summit at Beaver Creek. A lot of folks saw that. Just your thoughts if you want to go back again and talk about what you've seen recently in Tudor or even Teuton.

Eric: Sure. Sure. Well, of course, they all have a piece of the action there at Treaty Creek and Ken is a wonderful geologist. I have not seen the presentation, but believe me, the first thing I'm going to do today is watch that presentation, okay, because he's the guy that has the finger on the ground and he's a very good spokesperson for that deposit. And I know that there is a belief that this could be one of the biggest deposits in the Americas, and I certainly concur with that. If you look at the size of the step-outs, the depth of the hole. I think they had one that went down to 1140 meters. Oh, my God. That's incredibly large. So I'm pretty certain we're going to be hitting multiple of tens of millions of ounces there. So I like Tudor. I like Teuton. I like American Creek. And they're all getting a little beat up this week, but that's what creates opportunities.

Craig: That's right. That's right. I mean it's never straight up. We all know that. If you've been in the precious metals sector long enough, you know that.

Eric: Yeah.

Craig: Well, all right my friend. Hey, thank you very much for your time. It has been obviously a challenging week for everybody, but next week we'll bring the end of the quarter, and then we'll start getting into October and all the other concerns that you mentioned. And I'm sure wouldn't be surprised to see things turn around. Hey just to remind everybody, these weekly wrap-up podcasts are available on all sorts of different channels like YouTube, SoundCloud, Buzzsprout. Eric, I bet you're on Buzzsprout all the time.

Eric: Oh, yeah. Sure.

Craig: Facebook, LinkedIn, Twitter, you name it. So don't forget to subscribe to the channels that you like and give us a like if you find these to be insightful and helpful. And we'll try to keep putting them out there every week, try to be as insightful and helpful as we can. Eric, thank you so much for your time today. I really appreciate it.

Eric: Okay, Craig. All the best. Let's hope we have a good week next week.

Craig: Yeah. Well, it couldn't be much worse. Hey, and from all of us at Sprout Money News at sproutmoney.com, thank you for listening and have a great weekend.

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About the Author

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 author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, 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.

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