Weekly Wrap Up

Ready for Another Big Move in Gold and Silver? Welcome to 2020 - Weekly Wrap-Up (January 03, 2020)

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January 03, 2020

It’s the first Weekly Wrap-Up of 2020, and we’re already having a happy New Year in precious metals. After a great year-end rally, all the forces are coming together for some big moves ahead. Eric Sprott and your host Craig Hemke discuss all the gold and silver news you missed over the holidays and set the table for what to expect in the year to come.


In this edition of the Wrap-Up, you’ll hear:


  • What fueled the tremendous year-end rally
  • Why 2020 might bring the right prices for the wrong reasons
  • Plus: big news on Kirkland Lake & Wallbridge

“When you said ‘Happy New Year’, I thought, ‘You know what? We’re having a happy New Year.’ And maybe it’ll be reminiscent of some other New Years where we break into the open here and big, big things happen. And it’s kind of looking like that right now.”



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About Sprott Money

Specializing in the sale of bullion, bullion storage and precious metals registered investments, there’s a reason Sprott Money is called “The Most Trusted Name in Precious Metals”.

Since 2008, our customers have trusted us to provide guidance, education, and superior customer service as we help build their holdings in precious metals—no matter the size of the portfolio. Chairman, Eric Sprott, and President, Larisa Sprott, are proud to head up one of the most well-known and reputable precious metal firms in

Craig: As 2019 ends and 2020 begins, Sprott Money invites you to kick off 2020 in style. For those of you planning to attend the Vancouver Resource Investment Conference on January 19th and 20th, join us for a warmup event, an evening of hors d'oeuvres, cocktails, and networking with First Majestic Silver Corp. on Saturday, January 18th at the Cactus Club in Vancouver. If you're interested in attending, please let us know by emailing us at submissions@sprottmoney.com. More details can be found on the sprottmoney.com website. And those attending the kickoff party will also enjoy free admission to the conference. We hope to see you there.

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


Craig: Happy New Year from everyone at sprottmoney.com and Sprott Money News. It is Friday, January the 3rd, 2020 and this is your first "Weekly Wrap-Up" of the New Year. I'm your host, Craig Hemke, and joining us today from a land far, far away is Eric Sprott. Eric, greetings and happy New Year.


Eric: Hey, Craig, happy to be here. I'm basically at land's end in the southern part of Argentina. I'm going to try to speak a little louder so you can hear me here. But you know, when you said happy New Year, you know what? We're having a happy new year and maybe it'll be reminiscent of some other new years where we break into the open here and big, big things happen. So, it's kind of looking that way right now.


Craig: Great year-end rally since the last time we spoke two weeks ago. Things have progressed about how we discussed during our "Ask the Expert" segment last month. Both of those segments, both the gold and silver segment are now available at sprottmoney.com. If you want to hear what Eric thinks about a whole bunch of gold miners and silver miners, you can find that on the Ask the Expert tab at sprottmoney.com. And I want to let everybody know, our "Ask the Expert" segment for January will include a guest of Gerald Celente. Most people know who Gerald Celente is. He's the founder, director of Trends Research Institute and the publisher of the "Trends Journal." He's got a 40-year track record of identifying, tracking and forecasting trends. And he's world-renowned as today's number one trend forecaster. "Ask the Expert" is your chance to ask questions of the guest. If you have some questions for Gerald Celente, please email them to us. It's submissions@sprottmoney.com. Of course, you can tweet them @Sprott Money as well using the #asktheexpert. Eric, there's a number of things to discuss, but since it has been two weeks since we spoke, let's get caught up. First, what have you seen in the pricing of the metals and of the miners since we last spoke on December the 20th?


Eric: Well, we've had just a great end of year. In fact, the GDX ended up 40% for the year, beat all other assets, GDXJ up 39, gold, I think, was up 18. I think silver was up 12. A tremendous end-of-year rally, and as I looked at what transpired in those few days leading up to year-end, every day, you'd see this huge amount of open interest increase with undoubtedly the commercial shorter adding massively to their position. So much so that we're almost up to 800,000 open interestjust from like just probably the last time we spoke with just over 700,000. So, they've sold, like, had to sell $15 billion worth of gold to calm the otherwise big increase that was happening in gold. And then I looked at those last sort of 5 days of trading, the trading was...the open interest was going up by like, you know, 5,000 to 15,000 or 14,000 contracts per day.


I think, man, and I guess these guys are trying to keep it down for year-end so they don't have to book any losses. They are banks, you know, and you've got to mark to market, I presume you have to mark the market. There are different rules for banks these days. But nonetheless, I'm sure for their bonuses, even though they may not report to us, mark to market for bonuses, believe me, it'd be mark to market. So that you could see they were obviously leaning on the precious metals going into year-end though. So, it was very instructive to watch the first day, which we now saw. And in the first day, it went up less than a thousand contracts because I think they packed it in for the year. And of course, lo and behold, the price of gold goes up $11 and here we are today with gold up $21 or $22 for geopolitical reasons that we'll talk about.


And it's going to be interesting to see...we'll only find out late tonight what the commercials did, but, I mean, they obviously had to be a bit of a seller to contain this then even though it looks like we might close on the high here today, it's about 2:00 Eastern as we're recording this. But it's just been stunning. I've actually seen the price of gold hit a new recovery high here. I think it traded like $15.53 and I think the previous high was $15.52. We haven't closed it yet, but I would say all the forces seem to be coming together here. The commercials have themselves in a very tough position. I just arrived at this location. I know there's articles on the zero hedge describing the strong possibility that there may, in fact, be this shorting of physical product in what we call the commercial system failure.


I have not had a chance to read it because it's literally landed on the ground here. So, I would say lots of things going for us, and of course, the stocks, well, actually, the stocks haven't active that well in the sense of, I think [inaudible 00:06:02] was down yesterday, maybe down a little bit today. I'm not sure what happens because we haven't seen the numbers, but obviously, for people who own the stock that are producers, I mean, we've had a great time here. We tacked on what, we tacked on like $75 here in the last 2 weeks. So, it's pretty exciting.


Craig: And we should also discuss some of the other news today that's driving things today when we'll get to the geopolitical stuff in a minute. The U.S. PMIs for the manufacturing sector came out yesterday and again today, and it's just terrible, Eric. They're contracting quickly setting that whole sector in a contraction and recession. And that's not very good for the Fed's inflation targets either. It looks pretty clear at this point that this idea of no rate cuts in 2020 is off the table. We're going to have rate cuts, we're going to have more obvious QE. And gold's probably reacting to that too.


Eric: Well, it's kind of surprising in a way. You know, everyone thought we'd have a great...well, everyone always thinks we're going to have a great year going in. Okay? Like if you could call back to any year, oh, it's going to be 2.5%, 3%. Of course, it ends up being up 1% or something, less than 2%. And now, of course, this year, oh my goodness. Maybe it'll be less than 1% because the fourth quarter, obviously, is shaping up as incredibly weak. But, you know, the more you look at the reality of people on the ground and what their own individual financial situation is, and it's not good. And, of course, I keep going back to inflation being under-reported here. Of course, when it's under-reported, your wage increase and not keeping up with inflation. And every year it gets tighter and tighter and tighter.


I happened to be in a country [inaudible 00:07:45] where the inflation rate is between 50% and 60% this year. And the lamenting of the average worker is just incredible because they can't keep up. And of course, again, I think symptomatic of the ultimate problem is you have this bloated government who thinks they can manage everything, who wants to make all the promises that they can't keep. And it's so analogous to the U.S. Promises that you can't keep. So, economically, it's weak. And now we have this geopolitical situation where, you know, there's been some general killed in Iran and some Americans killed at the embassy. And like the last thing we all want to do, in fact, the last thing in the world I want to see is gold going up because of geopolitical developments. Much better it go up because people realize it's the safe asset that when you have times of uncertainty, which we have lots of economic uncertainty without the geopolitical uncertainty, geopolitical would override economic if something happened to blow up in the Mid East.


But nonetheless, we have enough economic uncertainty that for the average guy, he should...and I think of it down here, I mean, the average...think how much the peso has gone down. For years, [inaudible 00:09:07] I have no idea. You know, and whether it's in Venezuela or Argentina, all these countries, the currencies are under tremendous pressure here. And even against, of course, the dollar, gold is appreciated massively. And then you go back to 2000, I mean we've had a good run of the stocks that are on gold and it looks like we're ready for another big move.


Craig: Yeah. History has taught us both that spikes and gold due to geopolitical issues, wars and other headlines usually don't hold, and then no one wants to see gold go up on the back, you know, a big blood bath in the Middle East. But it is something that we're all aware of today. We'll see what the weekend brings. We'll see what early next week brings. If anything, Eric, any type of conflict there would certainly only further damage what is already a staggering global economy and would just ensure, again, more QE and lower rates, which is obviously beneficial to gold.


Eric: And of course, let's not forget that the people that are short gold are taking a real [inaudible 00:10:13] here. They're short $100 billion. Okay? We're short of $100 billion, no, more than that now. We're probably at $120 billion now, $120 billion short. Well, you know, 1% increase in the price of gold, which we [inaudible 00:10:28], you lost $1.2 billion today. You know, $1.2 billion here, $1.2 billion there, pretty soon you're talking about serious money. So, there's got to be a little bit of running scared of dying to see what did happen to the open interest overnight. Like it'll be shocking to me if they actually were buyers. Okay? To find the gains up, the year's over. We kind of end of the year where we didn't have to take some big losses and now we know what the drill is. We got a cover here. So, it'll be very interesting to watch what happens going forward.


Craig: Yeah. For the rest of the year even. Okay. Eric, since we last spoke two weeks ago, obviously, some developments across the board and some of the stocks we follow, we don't have...I asked Eric about a couple of majors today that had been sent in, AngloGold, Ashanti and Harmony Gold, Goldfields, but those aren't ones that Eric really follows. So, just, Eric, if we could, if you have any updates you can share with us with some of the usual suspects, we'd certainly appreciate it.


Eric: Yeah. Well, I think the important thing to focus on, and I've spoken to this many times, we had a big move in the price of gold. We could have a very big move going forward. The effect on the companies can be incredibly dramatic. Like there's companies out there where you can buy ounces in the ground in terms of resources from $10 and $15 an ounce in the ground. Okay? And it's a resource, so, you know, it's not proven. That's incredibly expensive. When the price of gold goes up $20 a day like it did today, and you could buy an ounce in the ground for $15, like, man, these things, if the price of gold wants to go to record highs here, which is what we're thinking of now, right? We are going to go in the new high ground dealer in terms of the recovery and hopefully new high ground in terms of the ultimate price going to $1,900. The profitability of these companies, whether you're a producer or whether you're an explorer who's got a resource of sorts, it's going to be incredible and the kind of moves in the stocks will be stunning.


So, you know, when I look at things like exploration [inaudible 00:12:35], the Walbridge, Discovery, Two-door, Two Pawn, a company called the Core, another one called Benchmark Metals, and there's lots of them that there. I own pieces of all of these things and many, many more. And I think, man, the price of gold wants to start hitting new highs, the interest is going to come back in here. And that would go to the producers where you have things like I own, of course, Kirkland Lake, Game Roz, I own Grand Columbia, Jaguar, things like that. And of course, the ones that have the smallest margins are the ones that are going to just react so quickly here. So, I would ask anyone listening, I mean, sharpen your pencil here. I think you should be a believer that we're in a serious rally in gold and silver and make sure that you're in the game.


Craig: Absolutely. That's kind of the message at TF Metals report for this year as well. Two, the one last thing, you'd mentioned maybe the production reports are coming out for Kirkland Lake in the next week?


Eric: Yeah. Well, I should talk a little bit about Baldrige because there was an announcement that I participated in the purchase of 10 million shares at 57 cents. That's where the issue was done that Kirkland participated in some other institution money from Quebec. It was a transaction that had been agreed to quite a while ago. So, I know everyone's, "Well, how did you get to buy it at 57 cents?" Well, believe me, when it was agreed to at 57 cents, it was around that price. So, nobody was taking advantage of anybody, but you could tell them advance in terms of newsworthy since it made the stock price go up. I totally expect, not that I have any reason to know, but I fully expect we should be getting the news release like early sometime next week. So, we'll look forward to that.


And yes, a quick production data for Kirkland. We'll kind of...I just, fingers crossed, at Fosterville, knocked it out of the park. I have a little trepidation in Fosterville because I don't know what the situation is with the fires down there because the fires had been quite extensive around Melbourne and Fosterville is just North of Melbourne. So, I don't know for a fact whether their production has been affected, but if it's not affected by the fires, I think that probably you'll have a very big solid number of the report. And, you know, Kirkland's rallied quite well here having hit a lower sort of 50 to 51 Canadian, it's almost at 58 today. And I think people are getting over this, the Grand Columbia thing...sorry, the Detour Gold thing. My apologies, that I think it actually was a great acquisition, particularly knowing that it's on the same sort of belt that Walbridge Arad [SP] who's now from what looks like a high-grade ore body.


So, I think that area looks very, really interesting here. And I hope that if Kirkland can put up some good production numbers that might cool out some of the short-sellers. I actually had a report given to me that something like 40% of all the trading in Kirkland in the U.S. markets you by shorters. And it just...I don't find it disbelievable but, you know, that's the nature of these weird markets that we're in. And as you know, we sort of signed up to, say, Canada mining by getting back into this only shorting on upticks, getting with bringing back the up to rule, but a shorter can do damage to things very, very quickly and spread all sorts of weird rumors about why this is good, bad, or whatever. And I think the Kirkland will prove the shorters wrong.


Craig: I think so too. All right, my friend. You're down there at the edge of the world. You know, there's some people think the world is flat, so try not to fall off. Okay? Because we need you. And I think it's astounding that I can be here in central North America. You can be all the way down at the end of South America and we could actually have this conversation. But before we wrap up, just wanted to double-check, see if there's anything else on your mind.


Eric: No, I think that covers it off. Obviously, it's going to be fun this weekend to see what's really happened on the Colmex here. It looks quite stunning and it's very to the precious metals and the most...the takeaway to me is the precious metal stocks outperformed everything last year. Don't forget it. And of course, now we're going into a time when the prices really moved in the last two weeks. Man, we could get some serious performance going forward.


Craig: That's for sure. All right. One last thing before we go, there are a lot of exciting developments as we turn the corner from 2019 into 2020. Hard to keep track of everything. So, please try to stay up to date and you can do so by signing up to the Sprott Money newsletter. You can do that. You can sign up for the newsletter by visiting sprottmoney.com and that's a great way to get some great stories. Keep all the information right to your inbox. Eric, all the best. I hope you have a relaxing vacation down there way south of the border and I hope to talk to you again soon.


Eric: Yeah. We'll stay in touch. You have a good one. All the best, everyone. And a happy New Year



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About Sprott Money

Specializing in the sale of bullion, bullion storage and precious metals registered investments, there’s a reason Sprott Money is called “The Most Trusted Name in Precious Metals”.

Since 2008, our customers have trusted us to provide guidance, education, and superior customer service as we help build their holdings in precious metals—no matter the size of the portfolio. Chairman, Eric Sprott, and President, Larisa Sprott, are proud to head up one of the most well-known and reputable precious metal firms in North America. Learn more about Sprott Money.

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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.