Weekly Wrap Up

“Buy More Gold My Friends” - Eric Sprott on Global Demand for Physical Gold (Weekly Wrap- Up - June 22,2018)

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June 22, 2018

Gold demand is picking up .. If you want to protect yourself from the vulnerabilities of currencies you have to own gold. Eric joins us from Dublin to discuss the following:


  • The Global demand for physical gold.
  • The Impending Trade Wars.
  • A WWU’s listener’s question on pricing structure of physical metal

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

Greetings once again from Sprott Money News and sprottmoney.com. It is Friday, June the 22nd and this is your "Weekly Wrap-up." I'm your host, Craig Hemke, and joining us, as usual, this morning is Eric O. Sprott. Eric, good morning.

Good morning, Craig. I'm in the middle of Dublin. We have a nonviolent protest going on here complaining about wars and things like that. It's a little lit in the background, but let's see what we can do.

Those Irish are fighting wars again, huh? You got to keep them...

Eric: It seems, but I heard that everything is sort of calm here these days. So, I think they're actually concerned about international developments, you know, in the Middle East and things like that.

Craig: Yeah. Give them something to do on a Friday, I guess.

Eric: Yeah. There you go, and it's a beautiful day here in Dublin, by the way, which is very unusual because it's nice and sunny and warm and pretty pleasant.

Well, all right. Before we get started, I have a little bit of news to pass along to everybody who listens. The folks at Sprott Money have an exciting offer for Canada Day. Of course, Canada Day coming up on July the 1st. If you are a Canadian or if you're an American citizen, you want take us up on this, you can save a dollar, 20 an ounce over spot when you purchase a 30th Anniversary 1 ounce Silver Maple Leaf. Hey, that's a pretty good deal. Limited quantities are available. So take advantage of this special Canada Day promotion by visiting sprottmoney.com or calling 888-861-0775. Again, save about 20 over spot. That's a pretty good deal. Eric, it's interesting. Sprott is considerably lower than it was last week. We were talking and things looked fine. The COMEX opened last Friday and they beat the living daylights out of us. What do you make of the action this week?

: Well, you know, It was so blatant, so ridiculous. The volumes are nuts. They bear no relationship, anyone's ability to deliver, but it serves the purpose of the commercial banks maximizing their profits from their customers by making options worthless. And the options on the COMEX, options on the stocks, options on the gold and silver ETS, they're just part and parcel of what we have to go through, unfortunately. And, you know, we keep hoping that someone can stand up to what happens with such regularity and so, obviously, manipulated, but we don't get much pushback. Thank God the Gakkai [SP] boys are filing some complaint to the banking regulator about the exchange for physicals, and I know you wrote a great article through Sprott Money on that. And just how the sheer size of these theoretical exchange for physicals that you most aptly described as exchange for paper, are just something that disappears somehow. It's mind-boggling. When you want to look at the data on the COMEX and they've got less than eight tons. I'm, sort of, debating whether I have eight tons, you know, and they have less than eight tons of gold. The service, you know, I don't know what the outstanding is for the next active month, which I guess is August. But, you know, there's probably, you know, 80 or 100 tons outstanding in that month. And they get under eight, seven point something tons available. So, I don't know. I mean, you look at that data and you just think, "Man, there's got to be no gold around." But for some reason, they're able to orchestrate a price decline, but that's the world we live in.

In the long run, we all know what's going to happen here because the gold Amanda is picking up, and I go to... I think the most interesting comment made this week was made by the Kazakhstan central banker who said, "Well, you know, we've got euros and dollars, and rubles and yuan, but if we really want to protect ourselves, we've got to buy gold." And so he's taken his waiting in gold from 16% to 50% and this is a central banker saying that. And I hope that other central bankers in the world are listening because if you want to protect yourself from the vulnerabilities of currencies, you have to own gold. And we saw the Russian Central Bank buy...what was it, 600...


Eric: Six hundred million dollars' worth of gold...

Six hundred thousand ounces.

Eric: ...this month? Oh, sorry. Six hundred thousand ounces. Yeah. Okay. So, we're talking 20 tons here, like, that's a big, big purchase. So, if all these central banks think that, you know...if more and more central banks think they should own gold instead of the paper, we're going to be in good shape.

Yeah. It sounds like this chief of Central Bank of Kazakhstan is a regular listener of ours perhaps, Eric. Will you give him a shout out?

Eric: He does. And he's a young guy too, right? He's only 42 years old.

Craig: Very. That is a young guy. Eric, the interesting thing too is you mentioned Russia they are now up to number five in the world, just a steady accumulation. Every month they're adding about 600,000 ounces. Number five largest sovereign stockpile in the world. I often state and you probably agree with this, I mean, if these nations, countries with massive dollar reserves are converting it into gold, why wouldn't an individual with dollar reserves do the same thing?

Eric: Exactly. Exactly. How about worse than dollars? How about people in these other countries that have currencies that are weakening like the Canadian dollar, and the Australian dollar, and the Egyptian dollar, and the Argentinean peso, and almost every currency around the world is getting obliterated. And, you know, buy more gold my friends.

Craig: The other interesting news this week that I just don't really see the markets taking too seriously yet, are all these trade wars and rumors of trade wars that president Trump is putting out there. Somehow, Eric, that is perceived at least in the short-term to be dollar positive. Can you make any sense of that?

Eric: You know, look, I've been through lots of markets. I remember the '08 crash and everyone went to the dollar initially, and they actually sold gold down. And then three months later, the market finally figured out, "You know what? We're wrong here." And they all start buying gold. So, lots of times, the initial reactions are wrong. It's not going to be good for the dollar. I mean, a trade war is bad for the world economy. Well, who's the number one economy in the world economy? The United States, okay?

Eric: Right.

Craig: So they're going to be negatively impacted. There's just no doubt about it. The worse problem is it's bad for the companies, it's bad for the consumer. In the very short term, of course, the government collects the tariffs. So in that sense, it's good for them, but sure not good for your auto manufacturer if the tariffs go up or other such companies where the unsecured product is impacted here. So, it's not going to be good in the long run for the U.S. dollar.

Eric: Yeah. I hear you. Eric, just one other question this week, and it comes from a regular listener. And this is a question that comes up from time to time and I thought I'd have you address it. You know, you and I can plainly see what's going on in the pricing structure, and how the price of the physical metal is derived from this derivative trading that has nothing to do with physical metal. But yet it seems that there's outside of about maybe Keith Neumeyer and you, where are the mining CEOs, and how come no one else seems to recognize this and they just gladly accept the paper price? Can you address that?

Eric: Yeah. Well, I mean, there are other CEOs that are, sort of, online. It's just hard to find a forum where you can, you know, present your arguments. You might imagine that, you know, the gold lobby could go to the U.S. government. They [inaudible 00:08:29] complain about it but, you know, you got to think that U.S. government is fully aware of what's going on, might even be arranging what's going on. So, that's not going to go anywhere. Look at Canada, we sold all our gold. Imagine I'd say, "Oh, you know, we should own gold." Yeah, because we sold it at 250, but once you've sold your gold at 250, it's hard to buy it at 12.50, you know?

Good point.

Eric: So, I don't know who's going to listen. I think it's not going to happen in the developed world. It's going to happen in the undeveloped world, in China, India, Kazakhstan, Russia, places like that. Those people will be way more willing to buy gold because we have a system here that where there's an [inaudible 00:09:15], I think, collusion between the governments to keep the price of gold suppressed so they can print their money. And people don't get agitated by it whereas they should be getting agitated by it because it's just depreciating the value of the currency every day. And someday, we'll just find out how, kind of, fraudulent the whole system was.

Right. In the meantime, it has been, for a few select miners, we've had a good weeks. And perhaps, again, we'll get into a bit of a summer rally here and the metals will come back as well.

Yeah. No, it's been good. As you know, Kirkland had a new high about two or three days this week. Things look like they're coming together there. If you pick the right stocks, you can do well almost in any market, and they don't have to just be gold stocks, but there's always winners and losers. So if you keep your wits about you, you can prosper. So, good luck to all the listeners.

Yeah. We'll try to help them navigate their way through it. That's for sure. Before we go, we mentioned a great deal from Sprott Money for Canada Day. Well, guess what? We're only really a couple weeks away from Independence Day here in the States. And so for our friends down in the U.S. celebrating Independence Day, Sprott Money is also offering a 1 ounce Silver American Eagle for 2.99 over spot. This is for Canadian and U.S. listeners that can take advantage of this, but it is a special promotion. So, again, wrap up this call by phoning 888-861-0775, or just simply visit sprottmoney.com to take advantage of this offer before all those Silver Eagles, and all of those Silver Maple Leaf's are gone. Eric, thank you so much for your time. I hope you have a safe trip, and a fun time over in Ireland. I guess we'll talk to you again next week.

And I'll be in Ireland next week too and maybe I'll survive this demonstration. You have a good one.

Craig: All right. Thank you, my friend. And from all of us here at Sprott Money News and sprottmoney.com, thank you for listening and we'll talk to you again next week.


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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.