Weekly Wrap Up

After Three Weeks Going Sideways, Gold and Silver Just Woke Up - Weekly Wrap-Up (October 25, 2019)

Head Shot of Eric Sprott Weekly Wrap Up

October 25, 2019

As we roll into another Diwali weekend, the newest inductee into the Investment Industry Hall of Fame—Eric Sprott—rolls out of bed to give you all the gold and silver news you need.

In a lively edition of the Wrap-Up, you’ll hear:

The surprise admission from the former head of the Bank of England

Why the floodgates may be about to open for gold and silver

Plus: the latest on the shares

“Well, I can’t believe where the prices are. You’re telling me that silver is up almost fifty cents. Fifty cents! Are you kidding me? That’s crazy. Wow. But it kind of had to happen, right? We know that the central banks are, quite frankly, seemingly in a quandary here. I don’t think they know what the hell they’re going to do next. Because whatever they’re doing has not worked. We can use the Japanese example of that, where it’s been going nowhere [after] thirty years of printing money...”

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

Craig: Well, greetings once again from Sprott Money News and sprottmoney.com. It's Friday, October 25th, 2019, and this is your weekly wrap-up. I'm your host, Craig Hemke and joining us again this week is the latest inductee into the Canadian Investment Hall of Fame, Eric Sprott himself. Mr. Inductee, how are you today?

Eric: Well, you know, Craig, what can I tell you? I just woke up. It was a long night and I have no idea what's happening today. So, I'm going to follow your lead, okay?

Craig: Okay. Well, then you don't know that we're up nearly 50 cents in silver.

Eric: No. Are you kidding? Come on.

Craig: How about that? Yeah. I ain't lying.

Eric: Fifty cents?

Craig: Yeah.

Eric: Oh man, that's crazy. I can go back to bed then. Okay.

Craig: That's right. You can just take the rest of the day off, my friend. Wait, hold on. You can't do that yet. We've got to do our call. So before we get started... Hey, by the way, I know you were celebrating last night. Did you know that this is actually Diwali weekend again?

Eric: I did know it was Diwali weekend. I don't know why I knew it was Diwali weekend. That's about the only thing I do know today.

Craig: That's about right. Wasn't it just, like, a couple of weeks ago we were using that as a promo, Eric, and now all of a sudden, I don't know where the time goes, my friend. But it is Diwali weekend and that's obviously a big holiday that a lot of folks observe and it's also a very good time to buy gold. So you can take advantage of our Sprott Autumn Sale by visiting the deals page on sprottmoney.com. Now, when you get there, you can buy a 40th Anniversary Gold Maple Coin. You may recall, Eric, we talked about that last week. It's from the Royal Canadian Mint. It's their anniversary coin. And if you do, what do you get, Eric? Do you remember this from last week?

Eric: You get, I think, a gold wafer.

Craig: You get some of Eric's gold. Yeah, exactly right. So go to sprottmoney.com, buy yourself in honor of Diwali, that 40th Anniversary Gold Maple, enter the coupon code, Wafer, W-A-F-E-R, at checkout, and we'll send you a little slice of Eric's gold pile in the form of a gold wafer when you do. Go to sprottmoney.com or call us at 888-861-0775. Eric, let's dig in, my friend. Not only is silver up nearly 3%, gold's broken out of its range, it's above its 50-day moving average and it's up $10 at $1515. We're off to a good start.

Eric: Come on. You're kidding.

Craig: No. Can you believe it?

Eric: What a great day. Why was I sleeping all this time?

Craig: Maybe you should sleep in every day. You are retired after all.

Eric: Yeah, maybe that's the right idea, right?

Craig: Yeah. Yeah, the bankers figured, well, Eric's not here to anger. So let's just take the day off. Could be, could be, but we're looking at Eric, what do you think of this? It almost appears...because there's not a lot of news today. It almost appears that after going sideways through this whole liquidity repo crisis for the last three weeks, and we're all scratching our heads going, "How come gold is always [inaudible 00:03:12]? It's like, all of a sudden, gold and silver just woke up, just like you did?

Eric: Well, I mean, I can't believe where the prices are. I mean, you're telling me silver's up almost 50 cents, 50 cents? Are you kidding me? That's crazy.

Craig: Yeah, well above $18.

Eric: Wow. But you know, it kind of had to happen, right? I mean, we know that the central banks are, quite frankly, seemingly in a quandary here, okay? I don't think they know what the hell they're going to do next because whatever they're doing has not worked. We can use the Japanese example of that, where you know, it's been going nowhere for 30 years of printing money. And now we got the ECB doing the same and they're in the tank and we get the Feds trying to crank things up and it looks like we're in the tank here in North America.

And I go back to the same thing as said before. I just think it's the massive understatement inflation, that people have to pay way more than or is being discussed, but they're not getting the wage increase, okay? Because the mantra is, you know, inflation is less than two, you get a wage increase of two. But inflation isn't too...it's ridiculous.

In fact, when I was at that function last night, the guy wrote an op-ed piece about how the cost of acquiring exchange information, stock exchange information, the cost of getting the information has got 11% for 10 years in a row, 10 years in a row, 11%, like, come on.

And that's just one example whether it's utility bills or real estate taxes or Medicare, whatever. I mean, who's kidding who that we have 2% inflation? That's a joke. So the average guy is just getting ground down here and it's showing up in negative retail sales in Canada, negative retail sales in the States. It's just going to keep going, I think. The inflation is eating away at people.

Craig: It's also why you and I have discussed for years that interest rates can't go back up. I mean, the Fed drained the money supply. They tried to run interest rates up. To service both the public and private debt became impossible when the economy rolled over. And this wasn't complicated. You could see this coming.

Eric: Yeah, no. And I think they now know what's not working. I read that Mervyn King said, "The central bank should get a meeting behind closed doors where we're all going to figure out how to solve this problem," because obviously, they don't have the solution to the problem. And they're not going to have the solution to the problem because they are the problem.

Craig: We should quote him, Eric. If people missed that this week, it was an article in "The Guardian." Mervyn King is the former head of the Bank of England, just like Ben Bernanke is the former head of the Fed. They had their jobs at the same time. Let me leave you one other quote Mervyn King said, Eric, because you might have missed this. His actual quote was, "By sticking to the new orthodoxy of monetary policy," whatever that is and, catch this, "pretending that we have made the banking system safe..." pretending.

Eric: Yeah. Craig, you and I have known that all along, okay?

Craig: Yeah. How many times we called them zombies, you know, Walking Dead, all that stuff. And here's the former head of the Bank of England. Can you believe Bernanke had said that?

Eric: Yeah, pretending that we've made the banking system safe. And here we go. Of course, so let's talk about repo. That's one thing I can remember this morning. How about repo?

Craig: Well, let's talk about that. All right, so here's the thing. Let me let me frame it this way for you, Eric. Because we've got another FOMC coming up next week, right, and Chairman Powell is going to have his press conference. Maybe you and I can get a Press pass because somebody's got to ask him and say, "Hey, look, Chairman Powell, six weeks ago, everything was fine, right? You were at a neutral rate, you were going to be data dependent on this stuff and now and, you know, under a month, you're all of a sudden monetizing 60 billion a month of debt with this new QE. You've expanded this repo from nothing to $120 billion a day. This looks like it's getting worse. Doesn't it?"

Eric: Yeah, you should ask him. When you get your Press pass, ask him, "What does 'Not QE' mean?"

Craig: Yeah, large scale asset purchase program.

Eric: Yeah, balance sheet expansion or whatever that is or balance sheet diversification or balance sheet whatever. I think that the only thing important about the balance sheet is the B and the S, okay? It's BS.

Craig: Yes, sir.

Eric: And I shouldn't be talking this way. But, you know, we've had a long night.

Craig: Let's look ahead. Next week, will bring that FOMC meeting. We'll be getting another employment report in the U.S. And as this is happening, as we pointed out earlier, gold and silver which had been, kind of, consolidating for the last month have broken higher. And they look like they're ready to roll back at least toward the highs we saw back in early September. You agree with that, you think we're going to have a strong end of the year?

Eric: Yeah.

Craig: I'll call that a yes.

Eric: Yubaba. I haven't used that word in a long time. We're having a Yubaba moment, you know, when everything is, kind of, going our way here. And, of course, it all makes some sense. And we have some interesting stuff going on in the shares too by the way.

Craig: Well, let's go there next.

Eric: Let's talk about that.

Craig: Before we get to some of the ones that we often discuss and that type of thing, I want to go back to something you told me. This is now 90 days ago. Sometime last summer, you said that usually in a new bull market, the first thing that moves are the majors because if you're making $100 an ounce at $1300 gold, you're making $300 an ounce at $1500 gold, that's going to get reflected in their earnings. Well, the first major to report this was this week it was Agnico Eagle. And based on this move in the gold price, Eric, I don't know if you saw it, they earned 34 cents a share, versus 7 cents same quarter last year.

Eric: Yeah. So it only went up by 500%.

Craig: Yeah, that's all.

Eric: [inaudible 00:09:07].Yeah, I don't know how people could figure that out though, you know, I mean that's a tough thing to multiply those numbers. Yeah. And that not only was it important that they earned the 34 cents, but the stock rocketed. The stocks now up about 10% in a week and, of all things, a 34 cent earnings on, what's it, about a $55 stock U.S., something like that. That's $70 and $77, I think, in Canada.

Like, it's still a big multiple, okay, we're talking like 40 or 50 times earnings. I love the fact that it went up. And what impressed me or what is going to be interesting for me is, I think, Kirkland will learn twice as much per share as Agnico. They'll earn twice as many dollars as Agnico and it's trading at a price of $61 and Agnico's, I'm talking Canadian now, and Agnico's at 77. Kirkland is going to make twice as much.

So I don't know. There could be some real big moves here and I would point out to the listeners that Yamana...and I haven't even seen the earnings because I've been sleeping, okay? But the stock's up 10%, 10% because their earnings were great. I don't know what their earnings were, but I think that could happen to some of these stocks where the earnings come out and maybe it's a computer. The computer says, "Oh my God, the stock's cheap, okay? You gotta buy it." And the algos start buying it. So, anyway, it's been fantastic.

Craig: It has and I would imagine most majors are going to report pretty good earnings and I would sure think, gosh, by the time...if the GDX thinks like that, they'll immediately respond. By the time we get her into January, and you get another quarter like this, you wish you think the floodgates might open.

Eric: Yeah, maybe by the time we get to January and gold is $1700, what do we think they're going to earn? Wow. It'll be exciting.

Craig: Exactly. Exactly. All right. Well, we are running a little bit late this morning. So for everybody that sent in names this week, we went through them. We don't have a lot that we can talk about with the names that went in here, but we'll take another look next week if we can. But in our remaining time, Eric, there are two companies that we've discussed frequently on these podcasts over the last year or so that had some really interesting drill results this week. One of them was Tudor.

Eric: Which ones were those?

Craig: Well, how about your Tudor? Can you talk about that?

Eric: Well, yes. What am I going to call them? They're, sort of, the inside holes, definition holes. They were good holes, but they didn't basically change the dimensions of the deposit because they weren't extending it further out in which there were inside holes. They're good. I'm going to be meeting with the management next week and I'll have more to report then, but I still believe there's going to be huge deposit proven up there. If we get the right environment in precious metals, which it looks like we might be getting here, people are going to start looking at these things again, and it could be very, very exciting, so...and I am, kind of, hoping that they can ultimately pull up, like, a 20 million ounce deposit there. So these stocks would prove to be very, very inexpensive. Was there something else we should be talking about?

Craig: There's a certain company called a Wallbridge. I don't know if you've seen anything from them or not, but a lot of folks are wondering what you think.

Eric: About which stock?

Craig: Wallbridge, you ever heard of that one?

Eric: Oh, yeah. Yeah, yeah. Wallbridge, they did come up with something, didn't they? Yeah. What did they come out with? They came out with 38 meters of 27 gram.

Craig: Yeah. That's pretty good, isn't it? From front I hear.

Eric: I'm sitting here in downtown Toronto looking across the street. I'm thinking that might be 38 meters across the street over there. Oh, my God, that's a big distance and almost announced a ton. Oh, my God. How good is that? And the suggestion that they have other intersections that are also very wide, this is all down by at about 500, 600 meters. Oh my God, what could be happening here? This could be dramatic. This could be very, very, very, very dramatic. You don't need too many holes like that. And by the way, this hole is on a...there's 1000 kilometer strike link to the Tabasco Zone. And now they're drilling down at 600 meters and 500 meters and finding these huge intersections. Well, you know, if this thing ever went the whole kilometer at depth with those kind of intersections, it'd be one of the great deposits in the world, okay? That's probably the way that...one of the great deposits in the world.

Yeah, they did these presentations in Montreal on Wednesday, Thursday. I have not seen the videos. They might be out but, as you know, I've been, sort of, preoccupied here right overnight. So I've done nothing today other than look at the price of silver going up 44 cents which is pretty exciting. And I hope that, you know, the people understand the true significance of what might be evolving here because I think it could be very large deposits. I said before that I was hoping it could be Detour Lake Mine. Detour Lake is 20 million ounces. And you know what? It's looking better than Detour Lake now.

So, you know, they get these wonderful, wonderful grades. And when you're in the...they're in the area called the Abitibi, there are mines up there that go down four kilometers. We're only at 500 and 600 meters so far. So goodness knows what we have there, but it is very exciting. The stocks reacted well here. I think there's going to be lots of strategic interests in Wallbridge, so hang in there.

Craig: Do you think a company like that...in your experience, Eric, is that a company that ultimately puts itself into production or is that a company that gets, you know, taken out?

Eric: I would believe it will get taken out. I mean, you're talking, you know, maybe it's a billion-dollar development here and, you know, a major would want to own that property and would pay a good price for it and will be able to fund it. So I would not think that they will be the people who bring it into production.

Craig: Yeah, it sounds like it's one of those, but again, obviously, believably great numbers. Holy cow. That is really something else. All right. Well, my friend, why don't we call it a day? I would encourage you to get yourself a nap later today, perhaps?

Eric: Yeah. Yeah. It was a long night, Craig. I'm sorry that our broadcast was a little delayed here probably because I was sleeping. Anyway, I apologize for that. But, as you pointed out early, maybe I should just go back to bed.

Craig: Well, and congratulations. What a great honor. Do you get like a bust like they do in the Pro Football Hall of Fame? Is there like a bust to Eric Sprott up there?

Eric: No, they give you a bowl. They give you a forged bowl. And I didn't land base in the investment business last night even though, you know, the investment business has a lot to make up for here with all the things, the shenanigans, that go on in the stock markets, but that's for another day.

Craig: That's for another day, my friend. All right. Well, we're going to have a very interesting week next week, no doubt about it. We're going to have a lot to talk about next Friday. And so I look forward to visiting with you then. In the meantime, everybody listening, I strongly encourage you to go to sprottmoney.com. Click on the Insights tab on that page and you'll get a link to our Ask the Expert series where just posted today was an interview I conducted a couple of days ago with author and journalist Naomi Prins.

Eric: Oh nice.

Craig: Great stuff. Yeah, Eric, you're going to want to listen to it too. She did a great job, really, really interesting. I encourage everybody to go there and check it out. And of course, click the Deals tab and get some of Eric's gold by entering the coupon code, WAFER, if you buy one of those 40th Anniversary Gold Maples. Eric, have a great weekend, my friend.

Eric: Hey, Craig, you have a good one too. I'm really looking forward to next week

Craig: Should be a lot of fun. And from all of us here at Sprott Money News and sprottmoney.com, thank you for listening. 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.