Weekly Wrap Up

“Everything is so vulnerable.” — Eric Sprott on the weak dollar. (Weekly Wrap-Up, January 12, 2018)

January 12, 2018

The year is off to a hot start with the dollar sinking and the price of crude oil going up. This week, Eric talks more about the “shockingly weak dollar,” the economic weakness in the U.S., and the continuing fraud of the COMEX.

But this week, he zeroes in on perhaps the strongest argument for precious metals: vulnerability.

“We have to talk about these Intel chips that were flawed, OK? Because if you’re a wealthy person, and a smart person, do you know that your bank account can be hacked? Do you know that the bank where you have your money can be hacked? Do you know that everything can be hacked? Where do you want to have your money? Do you want to put some in gold, so that at least it can’t be hacked, ‘cause it’s physical—you’ve got it in your own possession? So, I think that’s going to be very, very important to both gold and silver here, that everything is so vulnerable. Of course, nobody talks about it anymore. The market goes to a new high, it doesn’t matter that all our computers are hackable, because someone else is controlling the market. But as smart guys thinking about this sort of stuff, do I really want to keep my wealth in something digital where I have no control over it?”

To hear Eric’s full thoughts, including his “stock of 2018,” listen here:


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

Craig: Well, hello again from Sprott Money News and sprottmoney.com. It is Friday, January the 12th, 2018, and this is your weekly wrap-up. I'm your host Craig Hemke and joining us as usual, for the Friday discussion, is Eric Sprott himself. Eric, good morning.

Eric: Hey, Craig. Good to be here. Pretty good week so far. Let's hope we can hold it together.

Craig: Hey, my friend. Before we get started, I have a question for you. Did you know, Eric, that Sprott Money now offers exclusive promotions and deals to its storage clients? This month, Sprott Money storage clients can buy the 1-ounce gold Britannia coin for only 30 bucks over the spot price if you are a storage client. You can call our 800-number, 888-861-0775, to take advantage of this exclusive offer and even if you aren't a storage client, you can open an account today. And that'd be a good idea because you want to store metal in 2018. We're off to a hot start, Eric. And it only looks like it's going to get better from here. The dollar is sinking like a stone and threatening to put in new lows versus last year. You think we're on to something here? Crude oil is going up too.

Eric: Well, it sure looks that way. And, you know, the dollar's very, I mean, was very weak yesterday, very weak today. Like, it's shockingly weak. And it was even surprising this morning around...I guess it was 8:30, they put up the CPI numbers and theoretically they were a little higher than expected, which of course was a great opportunity to just flush gold down, which they did. But meanwhile, the dollar is still continuing to weaken. And theoretically if there are going to be a lot of rate increases, the dollar should strengthen. So it's just the boys doing their thing on the COMEX all acting in concert at the same time knocking it down. And, yes, I think we have a big US dollar weakness story going on, and it's from a lot of things. I think it's from what will ultimately be proved to be economic weakness from the political chaos going on down there, the tax cuts which got to be paid for, the whole bond market shenanigans that are going on, whether or not, you know, rates should be going higher here and at the long end. So there's a lot of concerns that people should have about the US dollar.

Craig: Speaking of the boys at the banks and their shenanigans, Eric, I got two different points I want to bring up with you this week. One, we know how they always increase the float of open interest. The banks as market makers write the contracts and sell them to the specs that seek gold exposure whenever price is going up. Well, this is particularly egregious my friend. Ever since December 26 when price broke up through the 200 moving average setting the speculator hedge funds, HFTs into the buy mode, the banks have added 110,000 contracts of open interest. They've increased the float by 23% trying to tamp down price. Just same old criminality as usual, huh?

Eric: Play it again saying it. And, you know, the interesting thing, Craig, it's almost contractor for contract, right. Every contract that the hedge fund or speculators buy the commercials sell. And I just hope we don't play it again saying we're all been waiting for the day that the commercials fall flat on their face and the demand just overwhelms them, which could happen here. This gold's going up on a lot of currencies where people do buy physical gold, not so much the US where people don't buy physical gold, but in India, in China and Russia, and South Africa and places where gold is adorned the price is acting very very well. We had a good '16. We had a good '15, and we are off to a good start this year.

Craig: Yeah. And of course those apologists, Eric, for the current system will tell you, "Oh, that's just the banks hedging for their clients" as if, you know, 110 contracts...that's what, 300 some odd metric tons of paper gold that's been created. You know, what's the latest hedge book? It's not even 100 metric tons. And so we're supposed to believe that.

Eric: Yeah. That is preposterous. We know that. Yes.

Craig: Also preposterous, my friend, are these exchange for physical transactions that you and I have been talking about for the last couple of months. We finally got some data from our friend Nick Lair at Gold Charts R Us. And I want to thank Nick for that. That's the context we've always been lacking is this surge EFPs a new phenomenon or is it something that's been going on for a while? Well, guess what, Eric, it has been going on for a while. In fact, the last couple of years the total amount of contracts per year moved off the COMEX and then exchanged for physical in London is about 2 million contracts, like, 6000 metrics tons. If anything underscores the fraud of the system it's this, isn't it?

Eric: Totally. It's like as you, and I have discussed, we don't really understand what goes on over in the LME, okay, because it's not transparent. And it's like these contracts just go over there to die somehow or are they a legitimate thing or what's happening here? And, you know, the fact that it's been going on for a while, that there's huge amounts relative to the annual supply of gold is totally inexplicable. And it makes you think that, you know, of course, the COMEX is, in my mind, a fraud vis a vis the real market for gold. So I think the exchange for physical is just part of the whole thing. Move it off, get rid of it, put it under some carpet somewhere, so nobody sees what's going on. So it's all very unfortunate that this is happening.

Craig: And like we said, Eric, I mean, for crying in a bucket, its 6000 metric tons a year has shifted of the COMEX this way, probably into London. And the LBMA vaults are actually audited, they say. And if you add all of the Bank of England's own gold that's stored there and all of the gold that's allegedly held for these ETFs, there's only 7500 metric tons, but yet they're shifting off 6000 metric tonnes a year. Come on.

Eric: Impossible. Yeah. There's a lot of strange things are going on the gold market. We talked about it at length, and someday we will have a physical shortage. And I hope, for example, we have a physical shortage in palladium here, which will be showing up and it might now spill over into platinum, maybe into silver, and then into gold. That's going to happen someday here. And then as the world kind of turns their backs on currencies, as noted through the results of the cryptocurrency, I think gold and silver, obviously, will be the place that ultimately that things go. And by the way, we have to talk about these Intel chips that were flawed, okay?

Craig: Right.

Eric: Because if you are a wealthy person and a smart person, do you know that your bank account can be hacked? Do you know that the bank, where you have your money, can be hacked? Do you know that everything can be hacked? Where do you want to have your money? Do you want to put some in gold so that, at least, it can't be hacked because it's physical, you got it in your own possession? So I think that that's going to be very very important to both gold and silver here, that everything is so vulnerable. First, nobody talks about it anymore. Market goes to new high, it doesn't matter that all our computers are hackable because someone else is controlling the market. But a smart guy is thinking about this sort of stuff and do I really want to keep my wealth in something digital where I have no control over it?

Craig: Yeah. If it's just nothing but a bunch of zeros and ones it can all go to zero pretty quick, can't it?

Eric: Absolutely. And you got to have some physical to protect yourself. So I'm not so surprised to see the physical gold acting well here, well, both with the current US dollar going down, but also the demand for product picking up as time's going on and as the gold is hitting very close to record highs in non-US denominated currencies.

Craig: Yeah. Eric, you mentioned the stock market at all-time highs. Hey, let's just wrap today by discussing a company that you are intimately familiar with, Kirkland Lake. That made some new all-time highs this week too.

Eric: Yes, it did. And they announced their production numbers just the other day. They're pretty hot, 596,000 tonnes. And...

Craig: Ounces. Ounces.

Eric: Sorry. Sorry. Yeah. Sorry. Yeah. Right, ounces. You're right. Thanks for the correction. And I've, you know, given talks on it before and I always refer to Fosterville in Australia which has done very well. We're coming up with these very high-grade reserves which we'll be getting into as we get into 2018. It could be quite surprising what we produce out of Fosterville. And now this, we have a mine up in Northern territories. And we shut down, but we kept drilling, and now we're coming up with high grade there too. And God knows if we restart that it could be a 100,000-ounce producer. So, there's a lot of good things happening at Kirkland. As you know, it was the number one performing stock in the TSX last year, the TSX 300. And it continues to act well and I think it will be quite exciting, another very exciting year.

Craig: Hey, and I think you mentioned to me, before we began, you wanted to discuss this Garibaldi Resources too.

Eric: Well, I want to mention it because I'm sitting here thinking this could be my stock as 2018. I have been a consistent buyer of it. That's all in the public domain. I think they're going to have a major nickel, copper discovery here, but it also has PGMs gold, cobalt. The value of the latest drill results was in excess of 1 ounce equivalent per tonne. And I think it could be very large. So I would suggest that people should be looking at Garibaldi resources. Look up the website. Listen to what the experts are saying about what the possibilities are because I think it could be quite substantive.

Craig: Well, tell you what my friend, this year is off to a hot start, and it's going to be a crazy and wild one. We are cooking in the metals pretty good even though the banks are fighting us. It seems every step of the way as they always are wont to do. I think we're going to pressure them pretty good this year. We're very close to a breakout in gold above 1400. I think it's going to be great fun and I think you and I are going to have a lot of fun talking about it.

Eric: Looking forward to it, my man. You have a good weekend.

Craig: You too, my friend. And from all of us here at Sprott Money News and sprottmoney.com, thank you for listening, have a great weekend, and we'll talk to you 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.