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Ask The Expert

Monthly Wrap-Up With Host Craig Hemke and Special Guest John Rubino

Monthly Wrap-Up With Host Craig Hemke and Special Guest John Rubino

In this episode of Monthly Wrap-Up, host Craig Hemke and former Wall Street financial analyst John Rubino answer your questions regarding the precious metals markets.

• How did gold and silver perform in the month of October, and what factors influenced their prices?

• What are the implications of central banks, particularly those in non-Western countries, buying significant amounts of gold for their reserves?

• How do central bank policies, such as the Bank of Japan's yield curve control, impact global liquidity and the broader financial markets?


Watch the full video below. 


Announcer: You're listening to Sprott Money's "Monthly Wrap-Up," with Craig Hemke.

Craig: Well, hello again from Sprott Money News and sprottmoney.com. We are finally ready to wrap up the month of October, and what a month of October it has been. I'm your host, Craig Hemke, and joining me this month to wrap it up is the great John Rubino. John, author, and analyst, that you can find on Substack now. Go to Substack and search his name, and sign up for his newsletter. Always great information for me. Grizzled veteran, right, John?

John: Oh, great to be on. Thanks for having me, Craig.

Craig: Hey, look, before we get started, just a reminder, everybody, this is, great content comes to you all month long from Sprott Money. We're wrapping up to October. That means as soon as November the 1st, you get holiday music on the radio, Jingle Bell, Silent Night, all that stuff. And, by the middle of November, you get the Sprott Money holiday sale, the biggest bullion sale of the year at Sprott Money, so keep your eyes open for that. That's gonna start in about two weeks. John, you do a great job of keeping your eyes open. I mentioned the Substack of yours. Tell everybody where they can find that if they're interested in following you.

John: It's at rubino.substack.com. And mostly in that newsletter, I focus on actionable stuff. In other words, we basically know that there's some kind of a crisis coming, but what do we do about it? So, which gold and silver and uranium stocks do you wanna own? How do you prep, with the rest of your life, to be prepared for some kind of a big crisis? So, so far, so good. It's a fun community to be part of.

Craig: Well, and again, you do great work, and people, you know, I've known you for years. I'm sure about everybody in the precious metals space is familiar with your work. So, again, just rubino@substack.com?

John: rubino.substack.com.

Craig: Dot Substack. See, gotta remind me of these things, John. All right. Hey, let's dive in. We are recording this here on Halloween, last day of the month of October. And what a month it has been. We wrapped up September with a reaction to the September FOMC meeting. Gold went down 10 out of 11 days, to start October, and it was not much fun, and now here we are at the end of month, and gold's on a, about a 10-day winning streak. John, as you look over everything that has happened here in October, how would you summarize it for everyone?

John: Well, nice little comeback for gold, and a smaller but still real comeback for silver. So, the question is, why did that happen, you know? And I think it could be in part because of the geopolitical turmoil right now you. You know, the Middle East is now burning, to be added to the Ukrainian war and everything, and that's enough to spook the markets, I think You know, when the world is that unstable, precious metals are a good place to hide out, so that could be part of it. And the other part is that it's seasonal time for gold and silver again. Towards the end of the year, Asians, who have their weddings in the spring, they start buying gold, to make into jewelry for wedding presents, and that usually gives the gold price a little bit of a tailwind, in, later in the year, and very early in the next year. So, that could be starting too. So, there's no way to know exactly why it's happening, but I'll take it. You know, gold was over $2000 an ounce at the open this morning. It's off a little bit today, but just generally, it's nice to see it up with that new handle at $2000. And I think it could be that in the not too distant future, $2000 becomes the floor instead of the ceiling for gold, and then we're off to the races.

Craig: How important do you think that is psychologically, John? We've been up here, banged around a few times. Does that impact a lot of gold investors, even maybe more, like, Eastern gold investors, to see a two on the dollar price number?

John: Well, for a lot of the buyers in the East, they like to buy when it's lower. So, I think it may affect them, but negatively. And for, you know, for most other buyers, big round numbers have a psychological impact. And frequently, they generate a lot of selling, because that's where people put their sell orders. And so, you...and that's called resistance. You know, you bang up against that number, and then you go down, and you bang up against it again. And then when you pierce it, that changes everything. Because then, the big round number stops being this barrier that's impenetrable, and it just, it's something that you're leaving behind. And so, I think that'll be the case with gold over the next few years, is where we start moving up and get into uncharted territory. And that is psychologically very important for momentum investors, right? When you have something that shows up on a lot of the momentum charts, people don't even care what it is. They just like the way it's moving.

And I think that's in the future for gold, when generalist money starts coming in, and, you know, not necessarily gold bugs, but people who wanna be in a hot market. And once gold and silver become hot markets, then they'll attract a lot of money from the rest of the world, and there is a ton of potential money out there that can flow into something like precious metals. So, I think that's, based on the numbers, in terms of the amount of debt that's out there, and the other huge, horrendous financial mistakes we're making, it's basically a lock that precious metals will go up from here. It's just a question of timing and trajectory, you know, and I don't think we should really be worrying about that too much. You know, if it's gonna happen, just position yourself, and be there when it really does happen.

Craig: John, as we are getting to the end of October, there are some events going on at the central bank level, a couple of them that I'd like to get your thoughts on. One here just really is breaking this week, as we record this, this last week of October, and that's a real conundrum, it seems, that the Bank of Japan has put themselves into. You've been writing about the demise of fiat currencies for quite a while. You wrote a great book back about 10 years ago, with James Turk, about the money bubble. And the Bank of Japan has really, like I said, put themself in kind of a tight spot, and we're seeing that play out here in late October. What do you make of this, their policies going forward, with yield curve control, and how might issues with the yen impact global liquidity?

Well, you know, gold bugs and other sound money people have been saying for years that the fiat currency countries would eventually find themselves in a box, where they've borrowed so much money that their currency starts to fall while their interest rates go up, and they can't fix those two problems simultaneously. And Japan is the first one to find itself there. They're in that box right now. The yen is tanking, and Japanese interest rates are soaring. But if they try to fix the yen with higher interest rates, that will send their interest costs through the roof, and it'll bankrupt the government. But if they try to lower interest rates to lower their interest costs, that'll send the yen off of the table. It'll just tank from here, and they'll have a currency crisis. And there's no way out of this problem, because whatever they do to address one problem makes the other problem worse, and that eventually leads to a gigantic financial crisis. And that's where Japan is right now.

So, if you wanna know where we in the U.S. are headed, we should be watching Japan, because we're making all the same mistakes. We're just a little behind Japan in terms of government debt. But we'll get there. And we'll have the same dilemma at some point, where there's just no fix for the problem. And once people figure out that there's no fix, then the markets react accordingly, which is to panic. And that's coming. But Japan, right now, is the story in those terms, and I think we should be paying close attention.

Now, about global liquidity, there's been this thing called the Japan carry trade, where you could borrow money in yen incredibly cheaply, because Japanese interest rates were so low, and then you could use that money to invest in other things in the world, and that provided liquidity for a lot of different markets. Well, if Japanese interest rates are gonna go up to levels that approach those of other countries, then that carry trade goes away. And it's not clear what replaces it. So, that's another reason to be watching Japan.

Craig: The other central bank development is this ongoing buying of gold by central banks, not so much the Western central banks, the, maybe we'll call them the G7 central banks, and everyone knows Canada doesn't even own an ounce of gold at the central bank level. But around the world, there's been quite a trend toward central bank gold buying over the last couple years. Last year, the largest amount of central bank gold bought since 1968, I believe. And now, all of a sudden, it's not really making much headlines, but this year is tracking to be even more than that, a bigger year than even last year, with two, couple of months here to go. What do you make of this trend, John? And do you think it is currently impacting price, as we move into the end of the year?

John: Well, I think a lot of central banks know what's coming. And they're looking for ways to protect themselves. And one way you do that is with gold, whether you're a central bank or a regular person. You know, gold in hand is something that protects you against financial instability. And the other thing a lot of central banks are feeling right now is anger at the U.S., for the way we've weaponized the dollar. So, they're looking for things they can hold as foreign exchange reserves that don't involve being part of the U.S. monetary empire, and they're choosing gold in a lot of cases. Like you said, they bought a thousand tons of gold in 2022, and we're on track for maybe 1200 this year. Those are really big numbers, in terms of the amount of gold that's produced by the world's gold mines. You know, it's maybe 3000 tons a year, right? Coming out of the world's gold mines? And so, central banks are soaking up one-third of that. That doesn't leave as much as usual for the other buyers. So, in general, that should be pushing prices up. And that could be what's happening now. You know, central bank buying is adding to the price pressure for gold, and to an extent, silver, so it's kind of a tailwind for gold, going forward, and there's, you know, no real reason to see that ending in any short time frame, because the problems that the world's governments have, in terms of too much debt, and general financial stupidity, are not gonna go away, you know. So, central banks are gonna be looking out at a world that is like today's world, only much worse, going down the road. So, I think they'll continue to buy, and I think that'll continue to help the gold price, other things being equal.

Craig: Yeah. Well, certainly, try to keep an eye on it as we go through this last quarter of the year, to see where it ends up, because it is a remarkable amount of gold, like you said. John, in our final few minutes, let's talk about the last couple of months of the year. If we'd had this discussion at the beginning of October, you know, we'd have been, "Oh, boy. This isn't very much fun at all." And then here we are at the end of October, and as you said, spot price right around $2000 an ounce. What will you be keeping an eye on as we wrap up this year and head into 2024?

John: Well, I think that at some point, the U.S. Fed is gonna have to capitulate, because we have a lot of indicators here pointing towards a recession pretty soon. So, when the economy rolls over, or there's a crisis, like, you know, another bank crisis, or any number of other things that could happen in the U.S., the Fed is gonna have to stop this whole higher-for-longer thing, and, first of all, stop raising interest rates, and then go back to cutting again. And I think that'll be a very big deal, because it'll show the world that this is it. You know, "You can never have tight money again, because look what happens when you do." And I think the precious metals markets will respond to that in a really favorable way. And so will the gold and silver miners. And I think it'll be bad news for maybe a lot of financial industries out there, because if we go back to easing again, we probably reignite inflation, and that's bad for the financial markets, etc., etc. So, you know, we get that kind of dichotomy, where real assets see increasing demand, where financial assets don't so much, and maybe see a lot of selling. So, I think 2024 could be a year like that. And if so, you know, it's a very big deal, because it could be the, basically, the end of the road for the fiat currency experiment, and the beginning of the monetization of gold once again. So, this could be one of those really big inflection points in financial history.

Craig: How about the mining sector? It's been a challenging year for the mining shares. I know that's all part of what you discuss at your Substack too. Do you think things get a little bit better next year? Is there anything you're keeping your eye on there?

John: I think higher gold and silver prices are good for the miners, obviously. But, you know, what I'm watching today, in particular, I'm writing something on Substack about it, is what happened to Franco-Nevada, which was arguably the biggest, safest investment in the gold industry, because it's a royalty/streaming company, which is the best business model in precious metals. And it's the biggest. And so, you know, I would put that as close to risk-free as anything in the precious metals space. And they just had a pretty serious piece of bad news. They'd invested a billion dollars in a Panamanian gold and copper mining complex, an incredibly big one, in the expectation of, you know, four or five...well, a very big gold-equivalent-ounce stream per year, for a really long time, for 30 or 40 years. And the Panamanian government is making noises like it may just close that mine down, you know.

And so, the question is, with something like Franco-Nevada, you know, the stock went down on this news. So the question is, did the decrease in market cap offset the potential loss from losing that investment? And if it did, does it make it an actually, you know, a better investment today than it was a month ago, because it's more beaten-down, relative to its value? So, that's an intellectual challenge, with a complex company like Franco-Nevada, but I think it might be possible. So, at some point, this becomes a buy, even if that mine gets closed, and that's kind of what I'm looking for. Like, where, you know, if anywhere, should we be buying this stock now, after this bad news? [crosstalk 00:15:30] thing that's important about this, though, Craig, is that it makes clear that there is no such thing as a risk-free asset in the financial world. So, even the biggest, most rock-solid gold mining company still has a lot of risk that physical gold and silver don't have. So, we shouldn't be conflating those two things. They are very different kinds of investments. And, you know, we should basically take care of our physical holdings first. You know, buy the gold and silver coins and bars you need, to form the basis of your financial life, and then start looking at more risky but potentially more profitable gold and silver miners.

Craig: I was thinking the same thing. I mean, gosh, if the best-run, it seems, royalty company, the one that just keeps going up year after year, all of a sudden it's going down as well, it's like, why am I even fooling around with some of these things when I can just continue to stack physical gold and silver? And I think that's what you're saying.

John: Yeah. Although you and I both own some Franco-Nevada, though...

Craig: Yeah.

John: ...and have been very happy with it for a while. So, you know, it's been a great investment up until just now. And the question is, is it gonna start a new run if it gets cheap enough in the current buying, or current selling pressure? So, we'll see, you know? That point might come, or it may not come. And we have to kind of figure out what we think of as its value going forward.

Craig: I would imagine you'll keep people posted at that Substack of yours, right?

John: I'm gonna post something on this today or tomorrow.

Craig: There you go. Again, Rubino, R-U-B-I-N-O, .substack.com?

John: That's it.

Craig: All right. And the other one we're gonna remember is sprottmoney.com. As John said, all of this just makes a great argument for owning more physical gold and physical silver. I like to tell people on my side, if you've gotta ask yourself if you have enough, you probably don't. A great opportunity to add to that stack is coming up beginning in the middle of November, the Sprott Money's winter holiday sale. It's one of the biggest events they have all year long, so keep an eye on Sprott Money as we get in the middle of November, for that sale. You'll find all kinds of great deals on physical bullion, and even places to store it through Sprott Money as well.

It's been my pleasure to speak with John Rubino, here in your "Monthly Wrap-Up" for October. It has been a busy month, but it's gonna be a busy month of November as well, so look for a full slate of new content from Sprott Money over the next 30 days, as we begin to wrap up 2023. Subscribe or like the Sprott Money channel, whatever outlet that you're watching this or listening this, so that you get notified as soon as new stuff is posted. As volatile as things are today, you're gonna wanna be notified as soon as things are posted.

John, thank you so much for your time. It's been great to visit with you.

John: Thanks, Craig. Talk to you soon.

Craig: And from all of us here at Sprott Money News, sprottmoney.com, thanks for watching. And again, we'll have a whole bunch of additional content for you beginning again at the 1st of November.


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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.


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