Eric Sprott on financial security in uncertain times (Weekly Wrap-up - April 13, 2018)

Transcript:

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

Craig: Well, greetings everyone from Sprott Money News and sprottmoney.com. It's Friday, April the 13th. Oh, good grief, it's April the 13th, Eric. This is your weekly wrap-up. I'm your host, Craig Hemke, and joining us is Eric Sprott. Eric, good morning.

Eric: Hey, good morning, Craig. As I thought about the phone call, I thought, "You know what? We almost had the perfect week." But like a lot of times, you know, it gets snatched out from under us. But anyway, lots of interesting things happening.

Craig: Oh, that's for sure. Before we get started, just a reminder for everybody, we've got a new special today. The folks at Sprott Money have an exciting offer for our Canadian and U.S. listeners. You can buy a 1-ounce Canadian Maple Leaf gold coin for just $19.95 over spot. Now, there are limited quantities available, so take advantage of this promotion by visiting sprottmoney.com or calling 888-861-0775. What better time to buy another ounce of a fine Canadian Maple Leaf gold coin for just 20 bucks over spot? I tell you what, there's a lot going on, my friend. Price is up for the week. As we speak, gold's about 1,341, which is up $5. Silver's up more than 1%, it's up at 16.55. But of course, prices have been higher, and they've been lower, and now we head into the weekend. How did the week's action treat you?

Eric: Well, it's been a good week in the sense of you know, investments and things like that. And we almost had gold breaking out here to three-year highs. Unfortunately, even as I reflected on it, I mean, the reason for gold, when it was rocketing, was not the greatest of all reasons, right?

Craig: Right.

Eric: We're talking about missiles being fired all over the place. And I'd prefer that gold would go up because there's...more people figured out that they shouldn't own fiat currencies and people thinking, "Gee, there might be a missile being sent off here." So, I think that will still play out, that there's lots of reasons not to believe in the currencies. And I'm sure in our discussion some of those things will come out here today.

Craig: Yes, you're right. Yeah. Nobody is sitting here pulling for higher prices on the back on the back of, you know, World War III. That's not going to make any progress for anybody.

Eric: No.

Craig: But it has been an interesting week. And you're right, we got up to where price was just looking like it was ready to break out, and it magically turned. Silver, too. Silver got right up to its 200-day moving average on the continuous chart, I mean precisely to it, Eric, and then magically got shoved backward. What are your thoughts, at least on price, at this point?

Eric: Well, I think everything looks fine. I mean, you know, we're seeing people throughout the world buying more physical gold, right? Most of the ETFs seem to have pretty good order inflows these days. I think the logic for doing that is increasing all the time. We have a stock market that's getting very jittery here. We've got a bond market that's in a bear market. We've got inflation rising. We have craziness going on in various currencies. I mean, you know, of course, we could go to the Venezuelan Bolivar, the Zimbabwe...what, or the Russian Ruble this week. I mean, things where currencies are just...and the Iranian Dinar, which fell, whatever, 8% or 10% this week. You know, how many people does it take to witness their currencies being that volatile before you finally say, "Well, give me something a little more secure."

And of course, even as I reflect on gold today, we've gone from, whatever, 1,065 to now 1,360, which we touched this week. I mean, that's almost a 30% move in three years. It's not bad, you know, compared to other currencies, even compared to the U.S. currency, which has weakened often in that time period. So I think the outlook for price is good. I think the outlook for people wanting to buy metal...not just people but institutions too, who are looking for an offset to the possible decline of share prices. You've already had a wipe-out in the bond market. And if you believe the Fed, you're going have a further wipe-out in the bond market. So, you know, I think the time is ours.

Craig: Let's take a second and talk about how that price is discovered, shall we, Eric? There's two things I'd like to get your opinion on. You know, the latest fad, I would say, the latest talking point of those who still deny manipulation and price suppression, even though, obviously, the evidence is clear and hard at this point, the latest fad is to say, "Well, yeah. There's manipulation, but there's no price suppression." Back on Wednesday during the rally in price that topped out near a new high for this year, all of a sudden, the COMEX decided to issue 32,000 new contracts, which is increasing the float of contracts by 6.5%. Without that increase of float, price would have risen further. And that is then the very definition of price suppression, is it not, Eric?

Eric: Well, that's what always happens. And Craig, I don't even know if you and I have ever discussed the...what we call, those of us who have been around the gold business a long time, the 1% and 2% a day rule?

Craig: Yeah.

Eric: And the standard rule is that the price of gold can only move 1%, okay? And in an extreme circumstance, it can move 2%. And on the day you're referring to, it topped out exactly at 2%. And that's undoubtedly where the flood of open interest was created because we got to stop this thing. The last thing that the manipulators would want is that gold's going up when stocks are going down and everyone can see it. So, sure enough, in comes the lid. And I think that day we probably did end up exactly 1%, not the 2%. I think we ended up $13.20 that day. So, yeah, you see it all the time. I mean, we get sick of it, actually.

And you know, you and I have discussed many times this new exchange for physical that comes in here. And I think every month now, we get about 200 tonnes of gold, which is what we mine every month, being shipped from the COMEX, theoretically over to the LBMA. Not that you and I have any track of really what happens since there's no transparency whatsoever once it gets over there. It just gets lost. But the numbers of tonnes of gold and tonnes of silver that somehow just go out into the ether there and theoretically get settled over in London, the numbers are absolutely stunning.

And maybe someday we'll all find out that it never did get settled, and somehow there's this huge Ponzi thing between various central banks, or the BIS, or whatever, and it's all just nullified. But in the meantime, they control the price. So, that's what you and I are dealing with. And I know you've written on this extensively, and I'm happy that you've taken up that responsibility. Because it's very frustrating, having been in this thing as long as I have, to have to witness this day after day, week after week and month after month. But I'm pretty certain that in the long run, owning gold and silver is going to be by far the smartest thing one could have done.

Craig: Yeah, back to these EFPs. I had a gentleman who's a Dutch money manager, has written an extensive piece, about 9 or 10 pages long, explaining EFPs specifically in silver, which...we talk about gold all the time. It has been over-the-top, and silver as well. Not to plug my site, "TF Metals Report," but it's there. I took it, made a public post out of it. It's right on the homepage. I'd encourage everybody if you're looking for more information on these exchanges for physical and what they mean, you can find it there. Eric, you urged me back in November of last year to start keeping track of them on a daily basis, just to see if the flow is greater than it's been. Just two days ago, since I started keeping track in late November, we went over a million contracts. A million contracts have now been shifted off of the COMEX and delivered, allegedly, probably through London, through this process, a million contracts. That's 3,100 metric tonnes, Eric. That's more than a full year's mine supply.

Eric: Yeah, I know. It's impossible to imagine. And of course, Craig, one of the things I always imagine, just imagine the real tonnes having to move around, and then go and do it in silver. You know, a tonne is not quite as valuable in silver as it is in gold. Think about those...the amount of tonnes those guys have to move around. I mean, you'll have truckloads and trainloads and jet loads of silver flying all over the place if there was really any settlement. So yeah, I know, it's a little...it's quite beyond belief. And who knows how it gets resolved.

But the metals have acted well. You know, it's been not a bad year. It's been not a bad three years. I think we'll see our way through this thing with the way everything is evolving. And kind of while I'm on that, when I think of the way things are evolving, I think of...you know, if you go back to basics and whether its interest rates rising, which is just not good for anything, we saw a sharp rise in bankruptcies here in March. It was up something like 66% from the previous year. We see housing weakening. We see auto sales weakening. We see the deficit exploding. The deficit for March was in excess of 200 billion.

You know, like, how are we going to deal with all these things? And of course, the cost of interest when you're $21 million of debt and you know, your cost goes up by 100 basis points, that's $200 billion more of interest. Wow, you could get in a real loop here with the deficit rising, the borrowing rising, and the interest rates rising. And maybe the Chinese stop buying and others can't afford to be in there. Maybe the Japanese, you know, finally stop their lunacy in their financial markets and stop buying bonds. Anyway, I just think that you know, if you go back to first principles, we've got lots of major, major problems going on here that look like we're not going to see any resolution.

Craig: Good. That's a very good reminder, no doubt about it. And just one last thing, Eric. We had a very sharp rally across the board in the shares back on Wednesday when metal prices were rallying. But the shares didn't give back all those gains on Thursday. They only gave back about a third. And so that's somewhat encouraging. And there are a couple of them, I know, that you follow pretty closely. What do you make of the shares here?

Eric: Yeah. Well, of course, I'm excited by what's happening. And as you know, this is not investment advice, but that stock hit a new recovery high here, the 10-year high. And it was quite a sharp move. And yes, it didn't give back much on Thursday. And so most of what I spend my day doing is researching stocks, and I actually wanted to take this opportunity to comment on a stock. And again, I'm not recommending that anybody do anything other than check something out. And I've talked about Garibaldi Resources before. They're a very small company. It's got a market cap of about 275 million. I am over a 20% owner. I've been buying it all year long. And I'm just...I sit there and think, "Okay. What's going to happen to this stock when they find..."

They have a drill intersection that is one of the highest drill intersections for nickel-copper ever. They say, "Well, we've got these...we've seen the underground by geophysics, we've got these two huge conductors so we're going drill this year." Of course, it's in British Columbia, which is not...they can't drill right now, but it would seem that they're going to start drilling in a couple of weeks, okay? Within a couple of weeks. And of course, they know where the conductors are now because they drilled holes where they can do these geophysical surveys. And I can tell our listeners that I have seen the core where they did hit this...the high-grade nickel and copper, and it's like a piece of metal. It doesn't look like a rock, okay?

Craig: Wow.

Eric: And you can just imagine if these guys drill this...these big conductors they have, and all of a sudden, this steel rod comes out of the ground, there's going to be no mistaking what they had. And believe me, you won't have to wait for some news release to say, "We've had success," okay? You'll tell. You know? Like, it'll get out there. And I mean, they could be into this thing in the next two to four weeks here, and I just think it could be one of the world's great nickel-copper discoveries. There's all sorts of information that one can use. Look, I'm not expert on this stuff. I just listen to other people. And so if somebody went to their website or some of the chat lines, you'll get the drift of what could happen here. We just think it could be a generational discovery, so I wanted to mention it before their drilling proved it up and we all, you know, didn't do our work ahead of time.

Craig: Eric, thank you. That's some extremely valuable information. Of course, yeah, everybody should do their own due diligence and check it out. That is a very exciting story. One last thing before we go. Again, no time like the present to continue to add to your physical stack or begin one if you never have. And just a reminder, besides that great gold Canadian Maple Leaf coin at $20 over spot, Sprott Money is also offering a 1-ounce Canadian Maple Leaf silver coin at just $2.15 per ounce over spot. Again, Canadian and U.S. listeners can take advantage of this promotion. Just call 888-861-0775 or visit sprottmoney.com for more info. Just like those Canadian Maple Leaf gold coins, quantities are limited so take advantage, I mean, like, now, this weekend.

Eric, thank you so much for your time. Always so valuable to get your perspective on these rapidly-changing events, and I look forward to talking to you again next Friday.

Craig: Should be a lot of fun. There's so many things in the air here, all of which I think can be very positive for precious metals. So should be a lot of fun. I look forward to chatting next Friday.

Eric: And from all of us here at Sprott Money News and sprottmoney.com, thank you for listening, and have a great weekend.