Eric Sprott on weak currencies (Weekly Wrap-Up - May 11, 2018)

Transcript:

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

Craig: Well, hello, again from Sprott Money News and sprottmoney.com. It's Friday, May the 11th, 2018, and this is your Weekly Wrap-up. I'm your host, Craig Hemke. And joining us, as usual, this morning is the one and only Eric Sprott. Eric, good morning.

Eric: Craig, great to be here. A little better tone for things and lots of great things happening in the stock market, so lots to talk about. There is a lot to talk about. And it is Mother's Day weekend. Eric, have you gotten any Mother's Day gifts for Mrs. Sprott yet?

Eric: Well, that was taken care of last night actually. So, I'm way ahead of the pack here, man.

Craig: That's outstanding.

Eric: Yeah. I'm home and cooled out.

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There are limited quantities available, so please take advantage of the special Mother's Day promotion today by visiting sprottmoney.com, or calling 888-861-0775. Again, mom would love some gold. I know that. Eric, we all love ourselves some gold. It's been a good week. As we speak, gold is about $13.25 and up, $10 kind of off the mat, bouncing off has some technical support. And silver's doing great, $16.85 up, almost 2% this week. How do you feel?

Eric: Well, I feel great. And by the way, speaking of gifts, I had the opportunity last night. I had a former director of Sprott was leaving. And I don't know, "What kind of gift can I give him?" And of course, I came up with some 10 ounce Sprott bars, silver bars. And that always goes over very well by the way, anytime, that people love receiving precious metals. And I love nothing better than, for example, handing out silver coins. And so, well, give these to your grandkids, you know, they'll just love them. So, anyway, okay. Gold and silver. Yeah, it's been a spectacular week, spectacular mostly, and not so much in the sense of the degree of the rise, but the fact that we didn't continue down. So, that's the bigger item for us.

Craig: You know, can you lay some of that at the COT structure, Eric? You know, we've already got the large specs and silver are net short, and a lot of the gold COT is washed out. Do you think it just almost feels like everybody that's going to sell is already sold?

Eric: Well, I think it's sad. Like, mostly, it's always about the COT, right? But there are things outside of COT, thank God. You know, we have lots of weak currencies. So, you know, if you're living in Iran, or Venezuela, or Zimbabwe, or Turkey, all these countries where the currencies are weak, obviously, if you had any brains whatsoever, you'd be buying gold as part of your diversification against your local currency. We saw great, great buying. This month, I think there was something like 72 tons purchased into the ETFs in the month of April. Well, that's a lot of gold. I mean, we're almost talking about a thousand tons a year, if I annualize it, just in the ETFs well. The ETF can't buy a thousand tons a year and then not be assured either gold or at least a sharp price appreciation. So, those things have made and have helped the whole process forward here. We have currency, well, for example, the UK currency, which got pounded when they didn't have that rate increase, you know? And then the Europeans have been strong supporters of the gold price. So, that's all worked together along with the COT where the speculators basically have no long position. So, as it runs here, they're going to have to come in and buy their positions.

Craig: That's what we're hoping for. You talk about gold demand, how about silver demand? I saw something earlier this week said India already is having silver demand surge versus last year. If you were to run rate out for the entire year, the amount of silver they imported just in January and February, we're talking something like six thousand metric tons. Eric, that's almost like 25% of global supply.

Eric: Yeah, those are huge numbers. I'm always shocked when, you know, somebody's importation goes up by 40% or 50%. In a tight market, you always wonder, "How the hang did that happen?" And, of course, we don't really get very good statistics when we have to look at the COMEX data and all these transactions where the theoretical, physical settlement goes off in the never-never-land somewhere. But yeah, those are startling numbers.

I think there was a law just enacted in California, that all homes must solar panels now, something like that. So that's got to help the silver demand. And I think, just generally, the sort of economic and political uncertainty that's flying around all around the world would cause more and more people to go there. So, yeah, the COT position has improved dramatically and it's in a bullish position.

Craig: Hey, let me ask you about this. This kind of flew onto the radar a couple of days ago too, a note from Goldman. And I know you and I and probably most everybody listening doesn't really hold the Goldman Sachs in high regard, but institutional investors around the world certainly do. And Goldman put out a note saying they expect commodities to outperform equities this year. Boy, I tell you what, if the institutions around the world start searching for commodity plays and mining sector plays, that could really start to pump things up, couldn't it?

Eric: Well it would take nothing, right? I mean, the stocks are so sold out, the commodities kind of sold out. You try to get...I mean, it's such a small mark. It's like one half or 1% of all the money in the world, if not less. So, if anybody decided they wanted to move in on something, they're not going to get in. I mean, the prices just have to go up a lot.

Craig: That's right. And there's more, there's going to be a lot more demand than there is supply, and I think that's something that works in our favor going forward. And, like I said, if Goldman starts taunting commodities to their clients, things could get exciting pretty quick. You know, and the shares have looked pretty good this week. There are a number of silver miners that have had a great week. And I think you've probably get some thoughts on that too.

Eric: Well, we've had a good week, you know, as the Chairman of Kirkland, it hit a new high, a couple of new highs this week. I found it very interesting, and this is not investment advice, but Kirkland Lake Gold somehow made it to the Investor's Business Daily top 50 stocks listed in North America. It's number 47. And I'm sure, it was just basically on the strength of the first quarter where the earnings tripled, but I presume other things, you know, technical things and other fundamental things.

So, it's good to see that stocks can go up like that and react like that and sort of sustain themselves. So, hopefully, you know, what happened at Kirkland could happen to others here if we get the gold price going up. Kirkland did make an announcement, I guess overnight, that the company bought 4 million shares of Novo from a company called Artemis in Australia. And that took us to just under 20% of the company. And it's more of a statement about Novo, quite frankly, than it is about Kirkland and our sort of hope that what Quinton Henning hopes to find down in Australia kind of manifests itself. And we might all find out a couple of years from now that this was a real opportunity.

Craig: It's a rather interesting time down in Australia. And with gold supply, certainly seeming to fall off and get tighter as we move forward with each passing year., anything that can come out of the Pilbara region would really be exciting.

Eric: Yeah. There's been a lot of articles about that recently, as you would have seen, talking about supply and the fact that there are hardly any discoveries. I think we discover something like 20 million ounces a year, and we consume of across 80 million ounce a year. Well, you can't keep doing that, you know? And we've seen that before. I think early in the 2000s, we were consuming 80 and finding 20 and, of course, the price went from $265 to $1,900. I'm not suggesting it'll do that this time, but we have the same kind of fundamental differences here between the finding rate and consuming rate. So, sooner or later, one of them is going to catch up with the other and we know which way that would drive the price.

Craig: Yeah. One of the questions that was sent to us by one of the listeners that listens to us on a regular basis, about company called Pacton Gold. They said, maybe there is some interest from you in a company like that. Is there anything you can tell us there?

Eric: Well, they're a Canadian company, Canadian-listed company. They're run by some fellas I know that have decided they would try to buy some properties down in the Pilbara. And so far I think they got 1,400 square kilometers, which probably, by our standards, is huge. By Australian standards, it's not that unusual get such a gigantic area that we're dealing with here. And hopefully, you know, if the gold endowment is somewhat universal across the Pilbara, or even in certain places, it could get quite exciting. So, I think I ended up buying something like 10% of their stock undiluted, maybe 20% fully diluted on the hopes that theory works, that Quinton is right that we have a quite a large area of gold endowment in the Pilbara area. So, it's a very small company. And then I'm not advising anyone to buy, they're just, for me, it's like a punt where if the whole theory works. And you can almost own anything down there, and I do own other companies down there besides Novo. So, it's just a little more diversification, little more participation in the play that I'm having effected.

Craig: And, just out of curiosity, Eric, one last question. You know, we all sit here and watch the prices every day, what do you watch...what are you more concerned within the world? Are you watching economic statistics, you're watching [inaudible 00:10:34], you're watching geopolitical stuff, what's on your plate?

Eric: Well, of course, I guess probably the biggest thing for us, gold investors, is how do people react to the financial conditions, okay? So, for example, what is the market going to do as the Fed literally tightens? Other things are going to go down, car sales are going down. It's getting tougher for the average American or just middle-class citizen...let's just put it that way. In the world, we see weakness in Europe now that was kind of unexpected. I'm reading about Obama care premiums that in the two states where it's been announced so far, in one state, they're raising it 64%, in another one, 98%. Like, who could afford this stuff? I mean, it's just incredible.

We say there's no inflation. I mean that 60% rise, if you already spend 17% of your salary on healthcare, that would be an increase in your inflation index of 6% for the year right there. So, I'm more concerned about the malaise that can happen and all of a sudden the market starts getting concerned about where the economy is really going. And I found it very, very instructive that the UK passed on raising rates.

So, there's a Central Bank saying, "Well, you know, if the numbers aren't looking that good, we're not raising." And it could be that that's ultimately what happens with the Fed. And, of course, that would take away one of the arguments for gold not going up. I mean, I don't believe the argument, but it's an argument that's made, you know? Interest rates go up, gold doesn't go up, it's totally fallacious. But you get it in the markets.

And I think that's why I sort of watch how's everything going along and how are people reacting to what the central banks are saying and doing things. And I think that the Fed may, in fact, have to pause here somewhere along the line because it's not nearly as strong as we're all thinking it is.

Craig: Okay, Eric. Well, it is definitely an interesting time to be alive. It's also a great time. It's always a great time to be adding to your physical stack. One last note from Sprott Money, we are also offering, this week, some Queen's Beast Bullion Coin Series coins. This is an inspiring lineup of heraldic beasts from the Royal Mint. And it celebrates the British monarchy. Heck, we got that wedding coming up in a week. It also offers a range of gold and silver bullion coins. You want to check these out, again, just visit sprottmoney.com or you can call 888-861-0775 for all your bullion and storage needs. Eric, it has been an interesting week. Let's hope that the trend continues next week and we have more fun stuff to talk about.

Eric: I will certainly look forward to it, Craig. All the best.

Craig: All right. From all of us here at Sprott Money News and sprottmoney.com, thanks again for listening this week and have yourself a great weekend.