Weekly Wrap Up

After an Incredible Week, Huge Things Happening in Silver - Weekly Wrap Up (August 7, 2020)

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August 7, 2020

It’s been a great week, with silver up $3.50 and gold up $70. But is the surge over or will there be greater gains in the weeks ahead? Host Craig Hemke and legendary investor Eric Sprott break down all the gold and silver news you need to navigate this incredible period for precious metals.

In this edition of the Weekly Wrap Up you’ll hear:

  • Why it’s “all about the silver”
  • What’s causing the shares to lag
  • Plus: the “hell of a deal” out there now

“Let’s deal with the most important data that we had last week. Unfortunately for our listeners, this data came out at 3:30 in the afternoon on Friday. And it was the Commitment of Traders report that basically suggested that the commercials were buyers of gold and silver at nice, big fat losses for the first time ever in probably 35 years. And they still have a major short position. One of the guys I read, he describes it as an event that has happened ‘never times before.’ Like, it’s never happened before!”

Man: You are listening to "The Weekly Wrap Up," on Sprott Money News.

Craig: Happy Friday to everybody at Sprott Money News, at sprottmoney.com. It's time for your "Weekly Wrap" up here on August the 7th, 2020. I'm your host Craig Hemkie. And joining us, as usual, this fine summer Friday is Eric Sprott. Eric, good morning.

Eric: Hey, Craig. A very, very incredible week so far, huge, huge things happening in silver here, we're gonna get really deep into it and try to let people know where this thing goes and it is not gonna be small.

Craig: I agree. All right. We have some very interesting times ahead, a lot of stuff to discuss. And we are gonna talk a lot about silver today, and we're gonna focus on silver this month with our Ask the Expert segment too. You know, once a month we bring in an industry expert and we ask them your questions. This month, the expert will be David Morgan of the Morgan Report. David's devoted basically his whole life to following silver. So as you might imagine he'll have some strong opinions and some excellent insights. If you have questions for David, we'll record that in about two weeks, send them to us at the word submissions@sprottmoney.com. Eric, it has been some kind of week. Silver is up about $3.50 as we speak on the week, gold is up about $70. Some of the mining shares are kind of lagging here as we come to the end of earning season. So I'd like you to talk about that too. But overall, what are your impressions about where we stand here this morning?

Eric: Sure. Well, maybe I can just dismiss with the economy, I normally talk with the economy. We had a jobs number today 1.7 million, we had initial claims 1.12 million like that's almost like a soft, the jobs numbers are not strong, okay? That's all I can say. And we have an economy that's the V is getting a little wobbly on the right-hand side, so enough said on that. Let's deal with the most important data that we had last week. Unfortunately for our listeners, this data came out at 3:30 in the afternoon on Friday and it was the commitment of traders report that basically suggested that the commercials were buyers of gold and silver at nice big fat losses for the first time ever in probably 35 years and they still have a major short position. One of the guys really he describes it as an event that has happened never times before, like it's never happened before that this is going on. And I want to talk to where we find ourselves now in the silver market. A lot of people don't believe in manipulation but they've got all sorts of evidence and then we got Department of Justice put it with their RICO inquiring the JP Morgan and precious metals. There's all sorts of evidence suggesting that the commercial banks and the Central Bank's lenient on the paper derivatives market and so much so that, you know, we have a short position of over a billion ounces today, okay? Outstanding, open interest in silver of over a billion ounces. We mine about 900 million only a part of that is supposed to go to investments, most of it's supposed to go to industrials.

These guys that are trading the derivatives, it's all investment, okay? they're not doing anything for anybody physical that needs it for industry, and they're basically on up here. And the one feature that I want to go to is when a group of players acting in concert has been the seller for 35 years and all of a sudden they realize, "Oh, my God, the game has changed because people are demanding physical." As an example the ETS, I think yesterday added six million ounces of silver, the ETFs alone. We only mine two and a half million ounces a day and it's supposed to be used for industry. The demands on Colmex go up almost every day for fiscal. So these guys were not expecting to have to deliver physical metal but they're short. And isn't it interesting that when someone who's been suppressing the price all this time, he has to become the buyer. Who's the seller? There's no seller left. The seller was the bank, the seller is you trying to buy it. Am I surprised to see that silver has had two days, it almost went up to $2 this week each day and another one a dollar? No, I am not surprised, okay? In fact, in my own account on Monday, and I actually was taking the advice following Ted Butler. Ted Butler said that on Friday when he read it, he went and bought out of the money calls on the SLV. Well, I went in and bought out of the money calls on the SLV on Monday morning.

And the people that understand a bit, of whom is very few. So, for example, the people at GATA understand what's been going on, Ted Butler understands what's going on, Andrew Maguire, yourself, myself, and the other fellow I need talk to later, Alasdair Macleod knows what's going on. And so there's not many... People are like, "Well, you know, that's probably because of negative internship." Yeah, that's all fine. Okay. We have a situation in silver like we had in oil not that long ago where some guys caught people going the wrong way, okay? Now it's in reverse. We have a bunch of silver shorts going the wrong way. And I suspect that some of the people that were in the canal are now on the other side of the action and they're also buying. You know when these commercial people know that they got somebody, man, they just lay the lumber on, okay? And I think you're gonna see dramatic things happening. And let's just go to the extent of what could happen in silver. I had mentioned many times before a group called the Technical Traders, Chris Vermeulen, and he wrote something that was sent to me on Monday over the weekend, I guess, and I'm paraphrasing now. But he suggested that sort of beginning, I guess, on the Friday, starting last Friday, that in the next 30-plus days that silver would go to $33 to $35. Now, here we have, we have a little know, we have a week under our belt. Chief, that's looks like a pretty damn good projection, didn't he?

Craig: He's pretty good at what he does.

Eric: We're more than halfway there, we're more than halfway there already. And he suggested that gold is gonna go to $2,300. But he said it doesn't end there. He said our targets for gold is $33.50. Just remember this folks, $33.50. World-changing. And his target for silver is $75 to $85. World-changing. And this is gonna happen before the end of 2020. Get your head into it before the end of 2020. Imagine these price levels and what was likely to happen. Now, and I'm gonna go to a fundamental thing for silver, okay? You know, and I know that silver typically has in its 5,000 or 6,000-year history traded 15 to 16 to 1 to gold. We're in the mid-'70s now. We were at 1$25 on March 23rd, the bottom of the silver price, why? I think it's going back to 15 to 1. Why do I think it's going back to 15 to 1? As Keith Neumeyer says the production of silver eight to one in the ground's mineralogy it's 12 to one, the buying of silver claims versus gold coins would suggest like the dollars going into silver versus in the gold, it's probably like five to one today. You can't go five to one when the values are 77 to 1, okay? Now, in terms of the 15 to 1, I want people to think of this. One of the ways that you make a lot of money and which is something that I have done, you've seen a picture ahead of time and you'll react to it. And what I'm gonna suggest is with gold at $2,000 that says the price of silver should be $166. Okay, let's just go with it, okay? Imagine, and you go, "Well, that's ridiculous." It might be ridiculous, but what if you miss it and what's the upside, and did you pay anything for it? Did you pay a dollar for this? No, you didn't, you're not paying anything. The stock market has not, nearly adaptive as this. Look at, for example, I'm was gonna discuss Discovery Mines later but I'll do it now. Here's a company that says they have a billion ounces of silver resources and the price of silver goes up like five bucks this week so he's had $5 billion more of value and his market cap under $500 million and it's hard to get anything this week. You're not paying for this. You're not paying it. How about $166? That's $166 billion. Are you paying anything for this when his market cap is under 500? No, you are not. But doesn't matter whether the $166 is right or not, although it's more likely to be right, because you're not paying for it yet. You didn't even pay for the increase in the price of silver this week. Nobody is paying for the increasing price of gold this week. Stocks have been sort of non-performers. Anyway, I just think we're gonna go back to 15 to 1. If the price of gold is $3,300, what's that $200 or $300, put that in your pipe and check it out and see how you could make a life-changing difference to your financial wellbeing going forward. To me, it's all about silver, okay? I know you said it last week, I said it so many times lately, and I think these silver stocks are gonna go crazy.

Craig: Well, what Eric referenced the Commitment of Traders report, it's a summary report comes out late every Friday from data taken on Tuesday, of course, so it's already three days old, so you can't really trade-off of it. But it gives you some idea of where the speculators are and where the banks are. And last week with price up $2.74 during the reporting week, the banks, that are listed as commercials in that kind of combined report, bought, went long, 6,000 contracts and covered 8,200 shorts. That's the thing. You can find that at cftc.gov. Eric, on the shares though, like a lot of frustration and grinding of teeth, because the shares are still, to me it almost seems like nobody's buying it. There's still this like a finite pool of money in the shares and people come in, they see the earnings and they go back out and then they come back in when the earnings are pending again. I mean, at some point we've got to get kind of a speculative interest to really start flowing in. I don't think we're seeing it yet.

Eric: People can't stand making money, you know? If somebody is up 50%, they think, you know, it's the world, you know? It's not the world, okay? When the gold stocks went up in 2000 to 2011, they went up 1700%, 1700%. When you making 50% man, you're making nothing of what can happen here? We've already seen stocks that have gone up 500% and 1000%. And yeah, I guess a lot of guys are tempted to sell them because they're in the chips here. But when you look at the economic proposition in front of you, you realize, oh, my God, what? There's a lot more upside here. I put a kind of blind bids for about seven silver stocks yesterday, some of them I'd never even heard of before, but they had silver and they were trading at garbage in the market caps. And I said, "Fine. You got 30 million ounces of silver and your market cap's, 5 million, I'll buy 20% of your company. Thank you very much. I hope you have it, and we'll see where it goes," because I'm imagining the stock will go up 20, 40, 50, 100 times. Get in there, baby?

Craig: You know what? You're reminding me of something you told everybody, I mean, at least a year ago, two years ago. I remember this came up a couple of times when people said, you know, Eric, you've got all this information at your disposal, do you have a better batting average than the average person, you know? You diversify and all these different things, well to remind everybody, you said, no, I don't, but I'm smart enough to know when I got a winner, I don't just bailout?

Eric: You got to stick with your winners, okay? One of the great things that happened to me, of course, I had a big winners from 2011 to 2016, 2017 in Kirkland Lake Gold which went against the grain of everything else, and was fairly easy by the way and they explained it many, many times in public forums what was going on there? And I'm gonna tell you, I have a Déjà vu all over again but silver I see exactly what's transpiring here, very clear to me. Now, I get a lot of help from these other experts for sure, and it sort of reinforces it, and then if somebody comes on technically says, "He's going to $33 to $35. Okay, here we go. You know, my thinking says, it's going there and way beyond there." So fine, I'll play it.

Craig: And you always mentioned too, when you get a winner you keep going, you know. It's like the people, everybody touts Tesla going from $300 to $1300. But the only people that made a thousand dollars a share are the ones that held it the whole time, they didn't try to trade in, trade out, you know, make 50 bucks here and that kind of thing?

Eric: You know, it's funny. I could give you an example of a stock I bought kind of a year ago, year and a half ago and it was Jaguar, okay? And I paid eight and a half cents for it. And it was sort of on hard times, but I'm sitting here thinking, you know, "This price of gold is going up here. They're gonna get bailed out." And of course, maybe at that time, it was 1,300 dollar-gold now we're 2,000 dollar-gold. They just reported their earnings, they earn 3 cents U.S., they're probably earning at a rate of 4 cents this month, this quarter because the price is up. So to make it 16 cents U.S. it's a 21 cents Canadian and stocks at 67. So it's whatever 3.2 times earnings. Thank you very much, I'll take it. And it's already gone up nine times, and that's at 3.2 times earnings. That's what can happen. Price is the important thing, price generates profits. There's no cost to the price going up out of your taxes but at least the rate stays the same typically. So you got to get in early and you got to stay the course. You know, it's tough for all of us, I mean, I see lots of volatility. I get the pains in my stomach too but normally if you got to figure it out what should happen in the intermediate term you'll be okay.

Craig: I know you've got some stuff you got to do this morning and we need to get to some of these stocks that have been sent to us for your discussion, but anything else on your mind before we get there?

Eric: No, I don't think so. I want to say one thing, I want to quote Alasdair Macleod who wrote an article, he's with Goldmoney. And I just want to give you the last paragraph as he wrote it. This man writes so well, I mean, I just love reading his stuff.

Craig: Yes, he does.

Eric: Okay. So his last paragraph says this, "This being the case, a gathering stampede out of paper currencies and derivative contracts into physical bullion has just started. Unless it is somehow stopped, it will destroy paper markets, and with them, the banks that have benefited from them over the last 40 years. The acceleration of the destruction of CF money will gather pace in the next few months and anyone who spouts macroeconomic nonsense instead of acting in the face of these developments will end up with nothing." Man, that's a brutal, brutal conclusion, "End up with nothing." Bear that in mind folks when you're making that choice between the stock and the physical asset.

Craig: And those banks and their traders may be mean and sometimes criminal but they're not stupid, you know? They can see what's coming.

Eric: And they'll go after each other. You don't kid yourself.

Craig: Well, that's true too.

Eric: One group of banker says, the other group of bankers pin down, lookout.

Craig: Like any other group of predators like a pack of hyenas, you know, if they're hungry and there's a hurt hyena, they're gonna go after the hurt hyena too. All right, my friend. Again, thank everybody for sending in questions, we had like 70 some odd submissions this week and obviously we can't go through all of them but I know there's a handful here that we want to get to from Jaguar to Spanish Mountain, Discovery Metals, Brixton, and even Opera Plata this week. Eric. I'll just let you take it from there.

Eric: Okay. Well, a lot of these have, certainly the last three had silver in common and it was announced I bought it, another piece of advert plateau, it was announced this morning. I'm just going for the silver content down there and the likelihood that they can have a very large increase in resource. I mentioned Jaguar because it's so cheap on earnings. Spanish Mountain is another company that just announced they put a further investment in it. And I'm kind of hoping that the market instead of focusing on the plan that the company has of developing I think is about a million and a half ounce resource, maybe with the price of gold going up here and maybe a match or targets are reached that the former resource calculation of 10 million ounces comes back on the table. And just imagine 10 million ounces that, you know, it could be worth $200 an ounce on the ground when the price of gold is $3,300 at the end of this year, you know, that moves these stocks a long way. I don't know, it sounds incredible to think that but that would make it worth $2 billion U.S., $2.6 billion. I'm not saying it's going there and this is not investment advice but if you just give yourself a little room for thinking these things can happen because you're not paying for it. You're not. I wanted to mention that another thing when I'm looking in front of a company called Benchmark, and they said they had 57 meters at 1.9 grams of gold and 91 grams of silver. Eric says, oh, 91 grams of silver equivalent to 1.9 grams of gold, we'd have grams of gold if it goes to 15 to 1. That seems like a hell of a deal to me because I think it's gone to 15 to 1. And so when you're thinking about construct converting the silver to gold. In fact, in the case of Discovery mines, the billion-ounce resource of silver at 15 to 1, now get ready for this is 72 million ounces of gold. Now, Craig, how many guys had 72 million ounces of gold? That's none, nobody. Maybe if you combine Newmont, Goldcorp does but before the merger, they didn't, Goldcorp, nobody did, nobody tells you what could happen. So we'll see. What other stocks am I supposed to be talking about?

Craig: Spanish Mountain and guess we had Jaguar.

Eric: I got Jaguar and I got Spanish Mountain.

Craig: Brixton?

Eric: Well, yeah Brixton. One of the reasons I bought this because they had two silver plays, I've actually forgot, I think one's called hog grant. I'm not sure that that described that property, there's another one up in Canada, even there drilling up in Canada I think it's the horn project had a lot of silver in it. And of course, I did go through the whole 15 to 1 thing all over again but those things can become, any gold or silver could become incredibly valuable. So that's I'm sure gonna do better. Some other names?

Craig: Well, we had a couple of questions this week too about is this you or, I mean, I don't think a lot of folks realize that you're doing all this from a laptop in your rocking chair now that you're retired, can you just explain that to them again?

Eric: Well, you get a view. I mean, there's, results come out every day. You know, Jaguar reported overnight , there's three or four other companies that would have had drill results that I cared to look at. I actually asked help from some of my guys and they brokered.

Craig: But Eric, my question is just these aren't Sprott Inc purchases, you're talking about. This is just you personally?

Eric: Oh, no. Yeah. Well, there's a difference. I mean, Sprott Inc does their own thing in terms of investing, in lending and so on and I do my own thing and they're totally different. And I know there's a lot of confusion sometimes and they say well, Sprott's the shareholder, and sometimes it's not Eric Sprott, it's Sprott Inc, not that I'm distinguishing between the two, but I'm more of a speculative buyer looking for very, very outsized return whereas most people want to tend to be a little more conservative and it would much rather get the more certain return that way lesser than what I might try to get.

Craig: Right. Well, all right. We're getting late. Anything else on your mind before we wrap up?

Eric: No, it's all about the silver here ,and everybody should watch it. I mean, I do the statistics on the open interest every day and how many people are putting in new contracts to take physical delivery to Colmex and watching the ETFs every day. And man, there's nothing that isn't working in silver. And notwithstanding we get these days, we had one last week we talked about last week which silver went down by, I think it might've been three or four bucks over like in a four hour time period. And I said, you know, they're just running the stocks here and sure enough, the stock price went right back up again, very substantially. But the boys can still play in the market and over the very short term but we have to focus on the long-term year. And the long term is not gonna be that long if our friends at Technical Traders are right. It could be very, very dynamic.

Craig: Yes, absolutely right. And I just want to tag this on as we wrap up. You know, everybody, it's fun to watch the shares and you see them move every day and we know about the leverage and we get a lot of questions about it. But again, we're talking about silver going up, okay? And at the end of the day, that's what you want to have. We know with silver, what you have especially when you hold it in your own two hands or in your own safe or buried at the bottom of a lake, sprottmoney.com is where you get your physical silver. We'll even store it for you, right? We're gonna redo the website here soon, it's gonna make it a lot faster and easier to use. So make sure you stop by sprottmoney.com, you'll find all kinds of great deals especially on Canadian maple leaf silver coins. So be sure to stop by sprottmoney.com or just call us at 888-861-0775. Eric, I wonder what prices will be next Friday? We'll just have to see.

Eric: Well, it's interesting to think that silver has gone up so much this week and I know some people get concerned about paying the premium, you know, when you're paying the premium which might be as much as $4 these days just to have in the back of your mind, 15 to 1, and $166, 75, 85, some number that says to you, I can't miss this, enough said.

Craig: And every ounce that you take delivery of whether it's gold or silver is one less ounce that the banks can use to wriggle their way off the hook, so you're contributing to the upside when you do it. Eric, my friend, thank you for your time, I hope you have a great weekend.

Eric: It should be fun, all the best and good luck investing to all our listeners.

Craig: Yes. And from all of us at Sprott Money News, at sprottmoney.com, thank you for listening. We'll talk to you again next Friday.

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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.