Announcer: You're listening to "The Weekly Wrap-up" on "Sprott Money News."
Craig: Well, greetings once again from Sprott Money News and sprottmoney.com. It is Friday, December the 8th, 2017. This is your weekly wrap-up. I'm your host, Craig Hemke, and joining us, as usual, this morning is Eric Sprott. Eric, good day.
Eric: Hey, Craig. Happy to be with you. Not a very great week for us. More of the same, and let's start talking about it.
Craig: More of the same. That's gonna be the refrain we hit here, I think, basically, as we begin to wrap up. But, as we begin, I wanna point out, of course, it is December. We are getting close to the holiday season. Do not forget that your perfect gifts for your loved ones can be found in the "2017 Holiday Catalog" from sprottmoney.com. It's on the site. Go there and check it out.
Eric, I guess we've only seen this what, maybe, a thousand times. Big build up in speculator long positions that the cartel, the bullion banks, hold price at a key technical indicator like the 200-Day Moving Average. They finally smash price through there, and then the flush begins. And here we are again.
Eric: Sure, and I did read on your website, actually, the article you did about that. I totally concur with it. And that's really the odd thing, that we've never seem to be able to get that large short position down. And it just shows that they have control of the market. They can move it at will. There's never really...you know, it's not associated with any in particular and it wouldn't matter whether the dollar was going up or down or whatever. Whatever their purpose is, they get there. And I guess I, sort of, subscribe to the thesis in the article that you wrote on your own website that once they can cover this, we probably will find a tradeable low there. It was interesting that the stocks were, kind of, hanging in yesterday with that big decline in the gold price. And that's typically a sign that, maybe, you know, the people know that the turn is coming. So let's hope that it comes. Now, when you look back, it's been horrible, the fact that we've lost all our gain in silver. I mean, how...to think we've gone all these 12 months. We've lost all our gain. It's been tough, but we have things that will happen here shortly that I think can change things rather quickly.
Craig: Yeah, and to that end, I know it's frustrating to see silver flat on the year, actually down now, a couple, maybe 1%. I wanna, kind of, run this past you, though. You know, we know, silver, the whole above-ground stock is, maybe, well, if it's $16 an ounce, we're talking $16 billion. And I want people to think about the massive capital rush that's gone into bitcoin just in the last month or so. At some point, whether it's in '18 or '19 or whatever, there's going to be a massive capital rush into gold and silver, as well. And it's gonna make 2010 and '11 look like a sideshow, like a prelim. Do you agree with that idea? With all of the cash that's been created around the world by the central banks? At some point, it's gonna come rushing into the precious metals and then it's all no holds barred?
Eric: Absolutely, and in fact to that end, I mean, there's been some studies, I think, by the New York Feds adjusting inflation isn't 2%, it's more like 3%, which I think both those numbers are a joke, anyway. But I think people can sense that it's the sloshing of money around that's moving things and therefore, physical commodities would share in that. And, of course, there are analogies between gold and bitcoin in the sense that the bitcoin owner doesn't like the fee of currency, the bitcoin owner doesn't like commercial banks, and I think that those are both things that most of us precious metals owners own.
I said before, on this program, that when some of these people decide they're gonna cash in their bitcoins, where are they gonna put their money? Talking about large amounts of money now, you know, what have we got? We are up to $400 billion, or maybe even bigger than that in cryptocurrency. So some people are gonna be selling here, and they are gonna look for a place to put it. And it won't take much to move things around in the precious metals market, because it's a pretty tight market right now.
We haven't even got into what's going on in the COMEX, in the sense that all these contracts that get pushed over to London all the time, and they're huge amounts every day. I mean, it's almost inexplicable that they could actually get those deliveries in London. So anything can, sort of, blow this thing up at any time.
Craig: Yeah, it certainly seems that way. And, again, we are in a sense, just repeating the same pattern of the last couple years, Eric. We've got tax loss selling in the shares pushing the HUI and the other GDX down to the lowest for the year, and we've also got this washout in both the speculator positions in both gold and silver driving them down to lows. But, again, it's just like '15 and '16, where the lows came in immediately following the Fed meeting that raised rates. Is there any reason in your mind why 2018 can't then begin just as those same way '16 and '17 did?
Eric: Well, I think there's a lot of good reasons. Of course, the tax laws selling is probably going to be by far the most important thing. Because once you take the lid off, I mean, any net buying that comes in, the stocks go crazy. So I think that's important. I think if people realize that a Fed rate increase isn't the end of the world, and none of them have been so far, and/or maybe the data doesn't continue to confirm that we're gonna have this robust economy that everybody dreams about, even though Middle America is getting passed over here, that yes, again, after the rate increase of gold, I would think odds on favorite is gonna go up from here.
So, and of course, the thing about the stocks is they can rally so hard. I mean, I think it was two years ago, we saw, what, 160% rally in about four or five months. So that was pretty spectacular, and I don't remember the extent of this year's rally. You probably do better than I do, but there were lots of stocks that were running real fast at the beginning of the year.
Craig: Well, and I would say I've been trying to warn folks on my site this week. You know, it's, kind of, like bitcoin. You know, if you weren't buying it back when it was $50 or $500, you're probably not too excited about buying at $5,000. And you've missed this little run that it's had, or tremendous run that it's had. And the same thing can be said for the stocks and for the metals, right? We saw that in 2016. That huge run to the begin the year of 200%-300%, but a lot of folks missed it because they were too afraid or scared out of the market at those lows in December of '15. I mean, you could make the same case here now. You've got to be in to win, right?
Eric: And with so many other events going on in the world that can change the outlook for gold so quickly, and I just think with this whole Middle Eastern thing and the utter chaos going on over there. I look at the chaos in the political situation in the U.S. and, oh...it's just so many things that all of a sudden could break. The fact that the Bank of Japan or the MBE, EU pull back on their buying of securities, wow, can things change quickly.
Say, for example, the equivalent of the FENGs in China fell 10% in the last two weeks. I mean, this market can break at any time here. And I see all these studies where, you know, the only thing that's happened in the last few years is multiple changes, because earnings, really, have hardly improved at all. So, you know, we're in a very vulnerable stock market, and bond market for that matter. So we could easily see huge shifts of money that would find precious metals to be quite rewarding.
Craig: Yeah, and as we said, it would make 2010 and '11 just look like a warm-up, if suddenly billions of dollars were looking for gold and silver exposure and came flowing into that market. Could really put the banks on their heels. And that's obviously what we're looking for, and hoping for, in 2018. But Eric, we're not quite there yet. We've got to get through next week with the FOMC. Any other thoughts before we get to that and have to deal with it next week?
Eric: Not really. You know, it's funny, I said it to you earlier, before we went on air here, that I've suddenly, sort of, been a little immune from some of the damage because of my involvement in some of these stocks that have done well, and I wish I could be more sensitive. But you know, when you're right, when you look at the HUI Index, I mean, here it's basically hitting a new low, which is very, very disappointing, considering we went through the whole damn year, with all sorts of reasons why gold should rally here. And, unfortunately, the cost, the commitment, the traders really didn't correct itself the last time down. So, here we are with one last flush. So let's hope that it is a great time to buy within the next week here, and we'll see some excitement going into the beginning of the year.
Craig: Yep, and those great stories that you've talked about, that are based down in Australia, you've got your finger on the pulse of those. And it's always valuable to hear from you regarding that. And I think 2018's gonna be an exciting year. So, with that my friend...
Eric: It's gonna be good.
Craig: ...we'll put you back to work on this Friday morning and we'll look forward to talking to you again next week.
Eric: Okay. All the best, Craig.
Craig: And to everyone out there listening, thank you for listening from all of us at "Sprott Money News" and sprottmoney.com. Have a great weekend.