Where Are You, Mr. CFTC? - Eric's Weekly Wrap Up

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

Craig: Happy Friday to everyone from Sprott Money News at sprottmoney.com. Yeah, it is Friday, October the 9th, 2020. And it's time for your "Weekly Wrap Up," I'm your host, Craig Hemke, and joining us as we record this actually late in the day on October the 8th, is Eric Sprott himself. Eric, good afternoon?

Eric: Hey, Craig, I'm glad to be here a day early.

Craig: And $1 short, right?

Eric: And $1 short.

Craig: Something like that. Well, all right. Well, hey, we got some stuff to cover. Of course, God knows what's going to happen between the time that we're recording this and the time this gets posted in about 18 hours. So provided that the world doesn't end or some other conflagration erupt, we're going to proceed with business as usual. Again, before we get started, we always want to thank all of our listeners for sending in questions and comments, which you can do through the email address submissions at sprottmoney.com. You can always listen to these weekly wrap-up segments on YouTube, SoundCloud, Twitter, Facebook, and through our newsletter here at sprottmoney.com. Whichever channel you prefer, be sure to subscribe and hit that like button if you enjoy listening every week.

And again, using that email address, you can send us questions for our Ask-the-Expert segment each month. And I'll be recording that and let's see about 10, 11 days from now with Chris Vermeulen, a technical analyst of some renown that Eric likes to mention because he does a great job. So we're gonna bring Chris for Ask-the-Expert. If you have any questions for him, again, hit that email address submission at sprottmoney.com and send them in. All right, Eric, that's enough intro. Here it is late Thursday as we record this. It feels as if it's been a lousy week, but most of the selling was all done in just a matter of hours back on Tuesday. Precious metals are just down a tiny bit on the week, and actually, the shares are up a tiny bit on the week. How are you feeling?

Eric: Yeah. Well, if it wasn't for that matter of hours, right?

Craig: Right.

Eric: Always a matter of hours. And when I think back to the carnage that particularly happened to silver in those few hours when I think it went down $1.20 in like two or three hours. And, of course, we have to struggle back from that. And we've struggled back, we're sort of around the $24 number. But I think it got down to $23 so we essentially got one of the dollar 20 back. And the same thing with gold we're, you know, pushing the 1,900 here. But I just can't believe that these things still happen that, you know, the shocking declines in the price all of a sudden, where are you, Mr. CFTC? How about the 50 cent decline in silver in a matter of minutes today? Where are you Mr. CFTC? Oh, thank God, the guy in charge of examining things that the CFTC has decided he should resign because he was AWOL anyway. And, you know, maybe the new guy might do a better job. But we can only hope so because pretty well, everyone on the planet that trades gold and silver has been accused of manipulation so far. So, you know, obviously, they're not doing that good a job. And I hate to keep putting them on the spot but, man, there's nothing to be proud of if you're at the CFTC these days.

Craig: Yeah, you know, and you mentioned the fines, a handful of convictions against kind of low-level traders, things like that. But clearly, the manipulation continues regardless of the fines. Even as we record this on Thursday, today, earlier today, right about 10:00 Eastern, which is 3:00 in London, in the run-up to the London p.m fix, which is the price that is now fixed on the wholesale, global wholesale level for the next 24 hours in silver, but about 18 hours in gold. Price was smashed in the just the three or four minutes running up to that for about $12 in gold and like you said almost 50 cents in silver. I mean, clearly, this manipulation continues. Eric, one of the questions we had this week before we get into some of the other stuff you had, I might as well just ask you now. I mean, people are writing in saying, "Look, clearly, the more people are figuring out than ever, right? Through the headlines that the prices are managed and controlled by the banks." Why did people... Why do we want to invest in something that doesn't have a free market?

Eric: Well, it's, of course, a great question. And of course, I have had the answer to that every day, for 20 years now because I did get involved kind of right at the bottom and I could kind of sense that, "Gee gold should go up here." But believe me, it was not an easy road. And I would venture to say that this, the price went down more days than when it went up. And of course, the sudden declines that happen in various years and months and whatever, which were in my mind totally orchestrated. But here we are with 1, 900. I got involved when gold was $260, roughly. So we're up 500 five times on that basis, almost six.

Craig: Yup.
Eric: And that's been an awful good payoff from 2000 to today versus any other asset, okay? And of course, it's been a great payoff even this year, notwithstanding, and now finding out that literally almost every day, someone is trying to manipulate the price of gold and silver. And, of course, I take great comfort in the fact that someday, the manipulation might end. And you would think, you would hope that with the fines, and the fact that these people are on probation, that maybe they would stay out of the market. And quite honestly, Craig, it looks to me like they are out of the market because the volumes on the COMEX has fallen off dramatically. I mean, it's just, they're probably down by...you know, I think maybe an extreme, they might be down by 80% or 90% decline in volume here because the banks are probably not prepared to stand in there, one, because they're getting their butts kicked. And two, because they got a regulator sitting there watching them. So, you know, notwithstanding the fact that, you know, we've been beat up on many occasions, believe it or not, we're winning the war. And, I mean, I can only express it the way I see how things have played out. It's been very, very good for me. But, you know, we whine every week, and you and I can both whine together here.

Craig: It just gets frustrating. All right. Well, with that behind us, what else have you seen this week? What has caught your eye?

Eric: Well, I think the biggest thing is... Well, we should all talk about the stimulus, okay, and the fact that Washington, the various parties can't agree on anything. But we all know they both want to spend money, and they're going to spend money. It's just they're trying to decide on whose terms it will be. So I'm pretty sure you're going to see a $2 trillion program, which I think when it finally gets announced will be great for both gold and silver. We also have the number of pundits coming out expressing their deep, deep concern for the U.S dollar. I think we talked about it last week that Stephen Roche came out and suggested that the dollar could easily decline by 25%.

I know that Alistair McLeod, who writes for Gold Money, which is a competitor to Sprott Money, by the way, God bless his soul, he's one of the great writers. And he's suggesting that this currency could just fall apart here. And sometimes when you see what's going on economically, what you see as what's going on health-wise, when you see the divisibility of the various parties, and you'll see the action of the people in the streets, you want to... How do they hold this together? I mean, it's just, it's mind-boggling that you can hold it together. So I think that they're both onto something here and they both think it could happen rather quickly. Well, needless to say, if it happens quickly, it'd be a godsend to gold and silver. They've already done amazingly well, but could go a lot further.

I might also mention there's a writer called Austral Lib, it's A-U-S-T-R-A-L L-I-B, who I've subscribed to recently, who's done some great work explaining how, if you have this next level of stimulus, you're going to have to go to the long end of the bond market to finance because the short end is just too jammed up here already with the previous stimulus. And that the likelihood is that rates move up here. And of course, we've seen rates move up a little this week, right? I think the tenure is around 77 basis points, maybe up from the 67 that it was when we spoke a week ago. So that would also indicate that it could create problems if rates ever went up because countries didn't want to own their U.S dollars through treasury bonds. You might be shocked at how quickly rates might rise here. And we've had a number of countries, of course, China and Russia being the two primary examples to say, "You know, we're not sure we really want to own those bonds." So we've got to stand guard on that one.

Craig: How about economically, Eric? Not a lot of really major news across the board this week. But some of the stuff out there still makes you wonder if there's really any sense of V-shaped recovery like they say.

Eric: Well, one of the things that I've talked to for the last few weeks, and I get to talk to again this week and that's the damage that the lockdowns of COVID-19 are causing from an economic perspective. And I said before, yes, I know that there's people that die, although I don't think the death rate is anything like any of us would have imagined, myself included. What the effect is of people who have got it and have long-term implications, I don't know. But we see a movement to try to stop the lockdowns. First of all, I mentioned last week, we had the CDC that came out and said the death rates nothing like we thought it was, I don't have to go over that.

Then we have this thing called the Barrington Declaration where he had something like 8,000 medical doctors and scientists who said, "The impact on the economy, just in terms of death rate might be more serious than the COVID is." And I'll give you examples. I happened to be in a hospital earlier in the week, I bumped into a guy, said, "Yeah, I'm getting a little skeptical of, you know, how serious this is, vis-a-vis the economy." He said, "Well, you know, I normally deal with strokes and people don't want to come to hospital. So even though they might have some suggestions that they had a stroke, they won't come to the hospital. And when they come to the hospital, it's too late."

And the same thing is true of cancer treatments, where you want to be checked to see if you have cancer in your body, but you won't go to the hospital. And by the time you go to the hospital, you know what? You got a more serious problem. We have mental depression, we're going to have suicides, we have higher divorces, we have bankruptcies, we're likely to have hunger here shortly. So I think there's a lot of things that say, "We got to get a little more balanced in what we think we all should do here." Now, I know the disease spreads quickly, unfortunately. "We've seen that with many, many, many examples. But for sure, and I hate to use President Trump as an example. But to think that the man theoretically had it, and five days later, he was okay, it's just almost shocking. But that's sort of what the statistical evidence is suggesting, that the number of people that are going to pass because of this, is nothing like we would have thought.

Craig: Right. Right. As we move deeper into fall here, in the Northern Hemisphere, we're gonna get close to the U.S election. Heck, Eric, that's less than four weeks away. Have you thought much..? I know I get asked a lot about what you think the metals will do? Should Trump get re-elected or Biden get elected and that sort of thing? Have you thought much about that?

Eric: Obviously, I think if Biden gets elected, that it would be very good for gold because, you know, we'll have all kinds of stimulus programs, and God knows what else, socialization, and so on. Maybe even capital gains tax on the rich or wealth tax or things like that, where, you know, "Please get me out of Dodge, where can I stick this gold and blow town?" So I think that all would be very constructive for precious metals. You know, what Trump would do? I don't know. I mean, he seems to be quite the spendthrift these days. Of course, he's already volunteered to see if I have a big program post-election after he gets elected. So either way, I think things look pretty good for the precious metals.

Craig: Yeah, no, I agree with you. A lot like, last year. We had a really hot run into the late summer in 2019, and then pulled back and consolidated those gains for 90 days, which then we rallied late in the year, and that set us up for this year, I suspect we're probably doing more of the same. As we head into earning season for the big producers, and really for all the other companies as well, what's on your mind as we get going looking at some of the shares?

Eric: Sure. Well, first of all, let me deal with the CME, Chicago Mercantile Exchange, because one of the things I've noticed, is strangely, every day, almost every day, in an expiry month, the outstandings contracts that want to be delivered go up. So in the last 42 days, we've had 40 updates where someone comes in... And of course, it was almost extreme yesterday. I think we had like 800 new contracts came in for the month of October, let alone the ones that are exercised. And one of the things I've noticed, even though the open interest is gone from $613,000, and gold to $555. We've had... And that's a change of 58,000 contracts. We've had deliveries of 75,000 contracts over that time. We've had ETFs of 130,000 contracts over that time.

So literally, every contract decline is a delivery plus. Does that mean that the 555,000 outstanding are all going to be nominated for delivery plus? And that's just the way that... And it never happened that way before. It would always go down every day in an expiry month, that some guys are, "Nah, I'm not gonna take delivery." But sure enough, they're taking delivery. The same thing is true in silver where we in silver, we've got about 20% of the days we have a decline in the outstanding at the end of the day, and 80% of the time, it goes up. We had something interesting happened in the silver ETFs last week, where the silver ETFs, we were in finally informed Saturday morning that there were 22 million ounces added to ETFs which really bothered me because it's announced on a Saturday morning when nobody's even looking at the damn thing.

But the SLV for the whole week, while we would maybe watch it overnight, suggested there was almost no change. Well, it turned out 22 million ounces, by the way, is the weekly production in silver. So that was a very, very big number. We've had the same thing happen this week, where, you know, looks like there's going to be no change. I mean, I don't want to say that on Saturday morning, we will all find out that there was a huge amount of silver demanded and that people are just withholding the number. But I'll give you two data points to look at.

The U.S Mints for the month of September announced that there was 124 times more ounces of silver sold than gold, 124 to one, which means the money that went into silver money was greater than gold. But for some reason, one of them trades at 80 times the value of gold, even though the amount of money that people put in was greater in silver than gold. The Perth Mint came out with their recent, I guess it was also the September numbers 25 to 1, silver to gold. So there's lots of data that suggests one, the huge interest in silver, and two, silver is mispriced in the market. And hopefully, the fact that JP Morgan shouldn't be doing any more banging on the Scotia, Deutsche Bank. I don't know who else was in there but there were other banks. You know, I think we got a shot at things getting back to normal here, and normal is 15 to 1 in my mind.

Craig: Yeah. Hey, and one more thing before we get to stocks, too, a number of people wrote in this week asking for your I guess, recommendations if you will. What are some of the message boards, bulletin boards, websites you like to visit to glean some information on the miners?

Eric: Sure. Well, I mean, my favorite board is ceo.ca. It seems to be a very high-level, wonderful inputs from thinking people where they're not screaming and yelling at each other and calling each other idiots, but are trying to add some creative conversation to the analysis. That would be my favorite. I also use Stockhouse. It tends to be at a lesser level. But those are the two that I tend to use.

Craig: Okay. And what do you have for us this week? What has caught your eye?

Eric: Well, there's not a lot corporately. I mean, it was interesting that there's this big merger between Saracen and Northern Star, two sort of Australian based companies. We had Beric, the CEO of Beric suggesting that there should be further consolidation, one in the industry and two in the industry in South Africa, which I suppose should happen. There was some drilling news from a company called Black Rock who came up with some interesting gold and silver results in Nevada. Amex Exploration had some great results which prove that their ore body was down to already 1,100 meters. And obviously being where they are in the Abitibi, it could go a lot deeper.

I would say the sort of knockout punch for the week was by New Found Gold symbol NFG in Canada. They announced that they had a two-kilometer step out from a hole. I'm trying to remember the first hole. I think the first hole was like 19 meters of 90 grams, something like...some incredible number like that. And they stepped out two kilometers away, theoretically on the same structure. I'm not even remembering what the results were, but it was something like 25 grams over a very decent width. But the fact is that it could strike the whole two kilometers and they think they have other structures that are parallel structures. So it has the opportunity of getting very large stocks that have done well, and only came public about two months ago. But it looks quite interesting.

Craig: Well, we had a number of names come in this week. Again, there's several that I mentioned to Eric that there's really just nothing new on like silver one, discovery, metals, things like that. I know you mentioned something about Vizsla, Eric. What do you have there?

Eric: Well, Vizsla, they announced a very interesting hole, good silver content, gold content just to sort of a continuation of these successful drilling that they've been exhibiting so far. So it's one that I own and it's one that I watch kind of carefully.

Craig: So folks are asking about Silvercrest. I mean, that's stock has come long way from where it began. Giving back some, but do you have any thoughts, any observations?

Eric: Yeah. Well, I have a pretty good holding in it. I like the fact that they're heading for production. I like the fact that they keep finding more and more and higher-grade gold and silver, silver predominantly. I love it when a mining company is sort of working with a 43-101 that's likely to be very wrong because it's understated. And obviously, the analysts wait for the understatement to be proven. Investors don't wait. We figured out ahead of time, so that when they revise what the real resources are, and everyone can act surprised, investors don't act surprised because you could kind of see it coming all along. So that's one that fits into that quarter category. It's like pure gold mining, same thing. I'm absolutely convinced that the grade is going to be higher, that the resource is going to be higher, the initial mining will be better and, you know, you'll see all sorts of things that when people wake up, they'll realize it's the way bigger opportunity than they initially think.

Craig: Yeah. Hey, let's end with one that we haven't covered in a while. I'm sitting here looking at a chart of palladium futures. You know, we talked about that quite a bit, and palladium was just rolling into January and into February almost getting to... We were very near $3,000 an ounce, it plunged, got cut by 50% in that dive in March, but now it is rolling again. It's about $2,400 now. It's really the highest prices that we've seen since early March, maybe late February. One of those companies that you bought back in the day when you were excited about palladium was Palladium One. Do you have anything there?

Eric: Right. Well, I do. I mean, they came out with an intersection this week of 72 meters. And I think I'm right in saying it was 1.96 grams of PGE equivalent, okay? And which is a great intersection. And I hadn't really looked at it much. I'm like, "Oh, my God, the market cap is only 20 million. What the hell's that about?" And I phoned a couple of guys and said, "Why is this stock only trading at $20 million?" Anyway, I mean, that's wonderful. It was in Finland, I think that they had this hit. And these things ultimately will come around here. I don't know, maybe everyone got out of the game because the price of palladium hit $3,000 and it went down to, as you say, $1,500, now it's $2,400. Hey, that is a great price for palladium. Don't kid yourself. Somebody who finds two grams of palladium equivalent, when the price is $2,400, imagine it was gold, and gold was $2,400. Like I had two grams. We get excited about a guy who's got one gram at $1,900, let alone $2,400 with two grams, so no, it looked great.

Craig: Yeah, that's one we're gonna have to keep an eye on. Again, if palladium is going to get moving higher again. That's for sure.

Eric: And it looks like it is.

Craig: Well, as we go to wrap up, again, this is late Thursday, as we are recording. We'll see how things go overnight and into the end of the week. Anything else on your mind as we wrap up this week and headed toward the middle of this month?

Eric: No, the only thing I can say is that the data on the... If I am to believe the data on the Commodity Exchange, which I never believe, and even the deliveries, do you really believe that the SLV or the other silver ETF bought 22 million ounces of physical silver in the week? That might be a bit of a stretch. But the data, which is showing you what the investors believe, what the investors are doing, is all positive. And maybe if they weren't really buying it, we're all going to figure it out. And we kind of see that with the COMEX data, where someone's in there buying the physical every day. Put it to them, put it to them, put it to them. So I think that's the most constructive thing that we're seeing here on a daily basis.

Craig: Yeah. And as we move toward the month of December, which is always the busiest month of the year for both gold and silver COMEX deliveries, we'll see if that doesn't help us out once we get past the election and everything as well. Hey, and one last thing for everybody listening, as I mentioned earlier, Chris Vermeulen of The Technical Traders, he's a technical analyst that Eric mentions quite prominently from time to time. I should stop. Eric you probably seen some of his latest forecasts, haven't you? What's he saying?

Eric: No. He's a great guy to listen to because he's looking for the bigs somewhere. Whether it's the big decline the big advance, whether it's precious metal could go to some incredible number, he's not afraid to say it. And he has been very good. Certainly, except from mid-year last year, oh, wow, if I had not picked up on what he was saying, I never would have been quite as aggressive as I was even though I naturally like to be aggressive. But he kind of set me on the path there when he said, "Gee gold's going to 1,650 in about six weeks," and sure enough, it did. So that was a very, very important time.

Craig: So he'll be our guest for Ask the Expert in October. We're going to record in about two weeks. So if you have any questions for Chris, just send them in at the email address submissions at sprottmoney.com, we'll try to get to them. And then, of course, no time like the present to use these, let's call them sale prices. If we had told you back in August that you'd still get a chance at when we're near 2,100 to look at gold at 1,900, you probably would have taken it. So take us up on it now. Visit sprottmoney.com, for all the great deals in Boolean and Boolean storage. Of course, you can always call us as well. 888-861-0775. Eric, thank you for your time. I hope you have a great Friday, and I hope you have a relaxing weekend.

Eric: Thanks, Craig, I'm looking forward to it and I'm looking forward to talking again next week.

Craig: And from all of us, that's, Sprott Money News at sprottmoney.com, thank you for listening and have a great weekend.