Weekly Wrap Up

The Dog Days of Summer Fetch Quiet Week for Precious Metals - Weekly Wrap Up (Aug 21, 2020)

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August 21, 2020

After a “ho-hum week”—silver’s slightly up, gold not down much—host Craig Hemke and legendary investor Eric Sprott break down all the gold and silver news you need as we look ahead to what promises to be an exciting fall.

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

  • The latest bad behavior from the big banks
  • The massive change coming in the silver market
  • Plus: Is the suppression of metals finally over?

“It bothers me—it distresses me—to think that it was from the period 2008 to 2016, and I heard tens of thousands… and it’s not just spoofing in the markets. It’s misquoting where the precious metals are trading, to their advantage! You know, ‘We’ve got a sucker client here who wants to buys something through us. Well, we’ll just misquote where the product is trading and cheat ‘em a little.’ I find it disgusting.”

Man: You're listening to the weekly wrap-up on Sprott Money News.

Craig: Happy Friday from Sprott Money News at sprottmoney.com. It's Friday, August the 21st, it's time for your weekly wrap-up. I'm your host, Craig Hemke. Joining us as usual, on a fine Friday morning, is Eric Sprott himself. Eric, good morning.

Eric: Hey, Craig, good morning. Kind of a ho-hum kind of week, but lots to chat about.

Craig: Boy, that's for sure. And it has been ho-hum. It feels like it's been lousy. But as you and I began to record, Gold's only down a couple of bucks and Silver's actually up almost 2%, so I guess it's not as bad as you think. And, hey, I just want to remind everybody, before we get started, please go to the sprottmoney.com homepage, and you'll find there in the navigation bar, all sorts of interesting blogs. That's where you can find this weekly wrap-up, you can go back and listen to the ones in the past. But you can also find our monthly segment called "Ask The Expert." I recorded about two days ago, this month's version with David Morgan, who everybody knows as a renowned silver expert.

The guy has devoted his entire life to following silver. And he runs "The Morgan Report," which is a great newsletter, subscriber newsletter for investing in the resource sector. So, please, click that navigation bar, find the insights tab, drop-down "Ask The Expert" and give a listen. I think, you'll definitely benefit from listening to what David Morgan has to say. Now, I want everybody to listen to what Eric Sprott has to say. Eric, it's been a crazy week. We got to start somewhere.

So, I think I will start with the news that hit...what? Yesterday? A day before? It all runs together for me, about Scotiabank being fined by the U.S. DOJ and inspector Clue Zoes [SP] at the CFTC. And in their fine, they had to admit to...the quote was, "Thousands of occasions of manipulating the prices of gold and silver." I'll just tee that up for you and let you take it from there.

Eric: You just want to get my blood boiling.

Craig: Yes. Yes. I want to get you all worked up.

Eric: It bothers me, it distresses me to think that it was from the period, what? 2008 to 2016 and I heard tens of thousands. And it's not just spoofing in the markets, it's misquoting where the precious metals are trading to their advantage. You know, we got a sucker client here who wants to buy something through us, well, we'll just misquote where the product is trading and cheat him a little. And I mean, I find it disgusting.

I hope all Canadians will refuse today with Magna and with Scotia, of course now and then I got to go to TD Bank that just got fined 122 million today for cheating people on...what was it? They charged them for overdraft protection even though the guy hadn't signed up for the overdraft protection. And I mean, it's kind of, you know, we shouldn't be getting so used to these banks getting fined all the time. I mean, it's hard to get a bank that can honestly say they're honest here. But the Scotia thing really ticks me off because, you know, I've had to live through this time, '08 to '16 to today. And you just see the things that go on in the market.

And of course, during that time, the CFTC had a five-year investigation, found no wrongdoing, okay. And then they patting themselves on the back for coming up with this judgment against Bank of Nova Scotia. Are you kidding me, CFTC? You're such a loser organization. I can hardly believe it. And I hope you're listening because you've done this horrible disservice to the public that you're supposed to be representing here.

And, you know, we've already had what was a Deutsche Bank, UBS, HSBC, J.P. Morgan, all admit to paying fines for manipulating the price of precious metals. Never having said they actually did it, they just paid the fine, okay? They paid the fine because they were accused of it but never admitted it in the public's mind, and no one ever goes to jail. So, no, it just drives me crazy thinking about what we've had to go through here. You know, you go and you fight the fight every day and you got some guy cheating every day. So, it's just disgusting.

Craig: Yeah. Welcome to the sector, Warren Buffett, though. I wonder what he would think about watching his investment in Barrick fluctuate up and down based upon what the boys at the banks want to do.

Eric: Yeah, let's just take today. I mean, not 20 minutes ago, the price of silver was down $1 on the CME, down $1. Went down $1 in about 3 minutes. Well, where the hell's the CFTC today? Since when should something go down $1, I hear about 5% or 4% of its value in like 2 minutes? Do they think that somebody is creating this downdraft purposely? Yes, they probably are. Maybe let's run some stops here, so we can try to cover are short. And, yes, Warren welcome.

Unfortunately, I don't really believe it's Warren that made the decision, I think it was some of his investment offers that made the decision. But of course, it was encouraging to see them step in there because obviously they're looking at the earnings and cash flows of Barrick and thinking, "Man, this is quite inexpensive versus the rest of the universe out there. So, we're going to start putting some money into gold and silver stocks."

And of course, we've talked many times about how inexpensive many stocks are included, the key ones that have earnings, of course, Kirkland Lake, and I've spoken about Jaguar, and how incredibly inexpensive these things were, and how there's been such great opportunity. I mean, of course, the opportunities continued to present themselves. There's not a day goes by I'm not looking for someone who's going to have some spectacular earnings when their production is normal, when the pricing is, let's say $2,000, which it was, and what kind of earnings or income. I wondered how cheap the stock is. And I still think there's lots of opportunities there.

Craig: Yeah, you're absolutely right. I mean, as terrible as the global economy is, it's certainly not bouncing back in any type of V-shape. It's just kind of nonsense to think it would even. As terrible as global economy is, there's no other market sector that has surging earnings and increasing dividends. And so, it is helpful to think that, you know, maybe folks will, at the institutional level, look around and go, "Well, geez, if Warren Buffett's buying some, maybe we ought to check it out."

And we've seen the GDX is outperforming the GDXJ this week, which is notable in that regard because that's where people put their toes in first. Eric, the other thing that's hanging out over our heads in terms of price, we also have the September COMEX silver contract, option is going off the board next week, and also the contract going off the board. I would imagine you'll be watching that too.

Eric: Sure. I think there's four trading days left, maybe five. They got about 60 odd thousand contracts, which is 300 million ounces of silver. Now, it won't be 300 million ounces of silver, but I would suggest that if it was 50 million ounces of silver, that would be a significant delivery request. And that's entirely possible. And the one thing I think about something I've expressed as many times now recently is that things have changed in the silver market. These banks could automatically get the price of silver down and keep, important word, keep it down through the derivatives contracts. I don't think that's the case anymore. They have this open interest which they're trying to cover.

They're using all sorts of shenanigans to try to get unsuspecting people to sell them their positions so they can cover their short...their short position is hardly declining. The open interest is still as large as it's almost ever been. So, in total, somebody out there short a billion ounces of silver in a market that might produce 900 million of which maybe 300 million is available for investment, but, you know, they're gonna have a tough time covering. I think that 35 years suppression of metals is over. And I think silver goes to 15 to 1. And I feel very, very strongly about that.

And of course, this is wild, gold's probably going to go north of 3000 or whatever number you want to pick, but it'll be a lot higher than here. Almost every data point I look at in silver is screaming at me that 15 to 1 is a minimum number. So, for example, SLV traded one third of the dollar value of GLD, yesterday. One third? Do we realize how much fewer dollars of silver are available to buy for saving versus gold every year? There's probably 50 times more gold to buy than silver. So, people can't keep buying it at a one to third rate and expect that the price is going to stay here.

And the only reason it stayed here is because these guys kept building up this huge short position, which they now have to cover. And the real difficulty is when you've been the seller all that time, who is going to sell it to you when you have to cover? So, I think that's why we're seeing so much volatility in the price to keep trying to run the stops here just like they did this morning, and then, of course, it bounces right back up again, because they're still in the jam. So, we have all of that to look forward to.

Craig: Yep, that's for sure. And Eric, I read 85 questions this week. I'm going to combine two into one real quick, just to get your thoughts. Someone who wrote in and said, "Hey, you know, how can there be a shortage of silver? I hear Andrew Maguire talking about not being able to get silver. I can get all the silver kilo bars that I'd like and I can get all the eagles that I'd like." I'll answer that one. That's because Andrew deal is a wholesaler, he deals in the thousand-ounce bars. The big mamas, right? Those are the ones that are very hard to come by these days. And then...go ahead.

Eric: I think another answer is this too, that, if you go to coins, you might pay $8 above the spot silver price, which means there aren't a lot of them. And of course, the men too often on seems to have silver available than unavailable. And you're right. I mean, when you deal in large sizes, they don't come as quickly as you might expect. And I'm absolutely convinced when I look at the data for the COMEX deliveries, the ETFs have tacked on about 1.2 million ounces silver ETF every day, we only mined two and a half million ounces. It's not all available for ETFs, okay? Most of it is supposed to go to industry. So, no, that's coming, for sure.

Craig: Well, in that "Ask The Expert" interview with David Morgan, I asked him because you and I talk about this every week, you know, this alleged silver that's flowing into the SLV. And I said, "Could that actually be happening?" I think he laughed out loud first, and then went on to answer the question. The other part of this two-part question was for people that are concerned about the SLV. You know, can you just explain to them again, the difference between the SLV and then the Sprott managed PSLV?

Eric: Yeah, okay. Well, for an American reason, one of the big differences is normal income when you sell it at a profit. Normal income, not capital gains. In the case of PSLV, it is treated as a capital gain because it's a trust. But the most significant thing is, PSLV, I can personally guarantee you has the silver. SLV, you know, when you look at, theoretically, what they're putting in every day, and you say, "Well, where are you getting that from?" Like, I just don't get where you're getting all this silver from.

So, I've always been in the camp that doubts that the SLV and the GLD have what they say they have. And of course, we do know today that the GLD, for example, says that they had some kind of understanding with the Bank of England, that the gold that theoretically has been purchased is available to the GLD, but it's over in England somehow. So, who knows how that deal is working? Maybe it's really just a lease. So, if you want to be certain, find an ETF that you 100% know has the product. And in the case of the PSLV, you can actually, if you have a big enough position, you can redeem it for the metal and people have done that before. So, you can't redeem SLV.

Craig: No, not unless you're a bank. If you're...

Eric: Yeah.

Craig: ...banks, you can. Oh, boy. All right. So, Eric, I think we've covered about everything but before we get to some of these stocks, I just want to make sure I haven't missed anything.

Eric: I don't know that I have much more on my chest other than...I mean, to me, the biggest thing to play here is potential massive change in what's going to happen in the silver market. I would remind people that if you traded at 15 to 1, the silver price would be about 150 bucks today. And, you know, it's fine to say, you know, that you can poo poo it all you want. You're not paying for that. I'm suggesting where it might go. You don't have to pay for that yet. You just get the play for it, which is a much more interesting way of looking at it.

I mean, if it really happens, think of the returns, the outsized returns, you're going to get, so. Which takes me actually to my first name, of course, which is one that I've talked about before, it's Discovery Mines. They had some great drilling intersections, over a kilo of silver which is 30 ounces silver, 30 ounces silver at 28 bucks is worth about $800. That's equivalent to about 0.4 of an ounce of gold. There aren't many mines with 0.4 of an ounce of gold. But it would be highly profitable, huge deposit down there in Mexico. I'm just dreaming about the price of silver being 150 bucks and what that might be worth. So, I still love that.

There was a great interview, I should direct the listeners that care about Discovery Mines. Taj Singh, who is the CEO was interviewed. That interview is probably available on YouTube, So, Taj Singh, I would suggest if you're interested in following up on it, listen to the interview. And I was quite surprised by the bullishness that was expressed and obviously because the drilling has been very successful. And the infill has and I think we're going to have the grade go up and the amount of waste go down and the economics improving and, man, you're not paying much for it if we get the move in silver that I suspect we're getting. And on that front, just to think that it's gone from 125 to 1 to 266 to 1 in about 6 weeks, that tells you something. We're probably going to 15 to 1.

Craig: Yep.

Eric: I want to talk about Wallbridge only because it's being put out there to the mine going to the GDXJ, yet again and missed it last time, as you may recall. That decision is made, I think in the middle of September. So that's three weeks away people start positioning for that ahead of time. So, Wallbridge is perked up a little here, and I think it's because it may very well getting to be put into the GDXJ. I'll mention the drilling at the SilverCrest. They had some great holes.

All these stocks, by the way, most stocks are in a funk right now. I mean, not much is going up. I mean, you bring out good results and nobody cares. But, you know, good results ultimately will end up being improved earnings going forward. So, someday, you're going to get paid for this. So, don't worry about the non-performance of the stocks over the interim because certainly the fundamentals, both at the corporate level and at the precious metal macro level, have done nothing but improve. So, everything looks pretty good.

Craig: And like I mentioned earlier, Eric, we had 85 questions this week. A lot of people are very appreciative of the information you provide every week. So, what I try to do is just try to find the companies that were asked about more than once, and sometimes it's two or three times and we try to get to those to make sure we get as many people answered as we could. Discovery Metals was in there. We had a lot of people asking about Walbridge again. So, thank you for hitting those. Another one that people want to know about was Gran Colombia, because you had moved into that, but it now mostly moved back out. Just what's going on there?

Eric: Yeah. Well, as I suggested, that's one of the broadcasts...I wasn't that pleased with doing a stream on one of the ore bodies that was part of Gran Columbia. And of course, I reflect back on it now and I'm like, "Oh, my God, you did a stream when silver was 17. And today it's 27." And, "Oh my god, how big a mistake was that?" I mean, I just don't like the idea of doing a stream when you're in the precious metal business. You're supposed to like the precious metal, not trying to hedge yourself in.

So, anyway, there were things like that on the Gold Note, which also diluted what was going to happen in the future. These are both decisions made in the subsidiary called Call Desk. So, I thought, I'm not aligning with some of these decisions, so, what am I hanging around for?" So that's pretty well explained.

Craig: That explains that. And then you mentioned stocks that just aren't really doing anything. I mean, it's frustrating to watch, but the progress moves forward and they still have the metal in the ground. And, so, we had a number of questions this week, wondering about Tudor and Teuton because all they've done is drift lower for the last three or four weeks. And Freegold's been drifting as well, just your thoughts on those.

Eric: Yeah. Well, you know, it's easy. When I wake up, one of the first things I look for is drilling news because I'm with great anticipation. I'm waiting for Tudor to report results and Freegold Ventures to report results. But we haven't got the results yet. So, in this environment where everything's kind of softening up here, why it's softening up, I don't know, maybe there's just some deep fear that metal price will come down, or people made so much money that there's always a reason to sell, as you know, but there's not always a reason to buy.

And the reason to buy will be some stellar drilling results. So, we have to wait that out, and I hope in both cases, the results are great. I believe they will be but, you know, you never know until you get there. So, I still own every share that I ever have purchased and I'm anxiously waiting to see the drilling results.

Craig: I know people are wondering, so do I.

Eric: Yeah. Well, anybody who owns a stock, you know, I don't know what the high-end Freegold was probably a $1.80 or something, Canadian. And now it's what? $1.40 or something. And I guess it's a little bit stomach-churning. But, you know, if there are holes hits, we'll be right back at the high. I'm absolutely convinced in the same with Tudor. I mean, they did have a good drilling result about, I can say three weeks ago, maybe four weeks ago. They can follow up on another one. We'll be right on cue again.

Craig: You know, and just to double back to Wallbridge, I'd forgotten about that not being included in the GDXJ last quarter. And a lot of people, you know, "How come the Wallbridge has been pulling back when it was not included? That was about the last little short-term peak." And, so, I wonder if that won't start moving it back higher again.

Eric: Well, I think it started to move back higher on that. I mean, it did hit a low of 90. I think it closed yesterday at 103 or 104 or something. So, it's come back without much news being out there. I mean, yes, it was one drilling result which it did react to. Plus, I think they got a new interpretation of exactly what they have at Fenelon. And I think it will become obvious that between the various styles of ore there, that they could very well have an ore body that will exceed 10 million ounces. So, we just have to wait for more drilling but it's kind of shaping up as we would expect.

Craig: Yep. All right. Well, we are definitely in kind of the dog days and doldrums of summer where it seems like everybody's on vacation globally trying to get some downtime before we get into September. And I know we are going to have a busy September. I do want to remind everybody though, the Kansas City Fed always hosts their annual Jackson Hole Symposium. Remember all those central bankers around the world go out to Wyoming?

Eric: Absolutely. Me as well. I don't know what the hell I'll talk about that will be worthwhile, but I guess they can least have a party.

Craig: That's right. And it's gonna be online this year. Like, everything else is online. That is next week. And Chairman Powell is supposed to speak on Thursday. So, it's maybe quiet and doldrumming out there, but there's still a reason to watch the news and there's still a reason to listen to the weekly wrap-up. That's for sure. Eric, before we wrap, we do want to make sure, anything else on your mind this week as we go?

Eric: Yeah. Well, I should have mentioned, I mean, the setup for Chairman Powell to speak, I think he's going to talk to letting inflation run a little above the norm. I think that's what it is, that, he'll say, "Well, you know, our target was to...we never got to for the last 10 years. So if it runs a little hot, we're gonna let it go." And speaking of hot, there's no doubt that we have lots of inflation here. I don't know if anybody's looked at the price of anything to do with construction materials, but they've gone absolutely bonkers if they're available.

I've always watched something called the Chaplet Index, which is a measure of 500 different things that people buy, and it's published every month. And every year, the index is up 10% a year. And it's up 10% so far this year at an annualized rate. I've never been a believer that there's no inflation here. The way they count inflation, says there's no inflation. But believe me, there's lots of inflation. So, I think he's gonna open it up here that he's going to allow inflation to run because I think they probably know it is running already.

Craig: Yeah. Yeah. And again, that just institutionalizes negative real rates, because they're probably going to slap on yield curve control at the same time. Gold got to $2,100 with real rates, negative 1.1%. Where will gold be at negative real rates of 2%?

Eric: Oh, yes. There's no doubt that the big shift is in the bond market, where people are saying, "I don't think I really want to be here and make my 0.6% and actually lose 1.5% a year." And as you say, would get worse. And I think it's the bond guys allocating the gold, believe it or not, because obviously, equity guys have done well here, okay? It's the bond guys that are saying, "We need some diversification." So, yeah, it could be very exciting for gold here.

Eric: Sure could. So, watch those headlines next week. Oh, and one last thing before we go, Sprott Money is going to be launching a brand new website on Monday, listening to our customers. We made a faster, easier to use website that we're excited to share with everybody. It's going to launch on Monday. But in the meantime, sprottmoney.com is going to go down tonight at 08:00 o'clock Eastern.

So if you go on this weekend, and see that you get an error, if you go to sprottmoney.com, it's not like we've left town or anything, right, Eric? It's just that we're taking the site offline to roll out the new one. And I think you're gonna like it. You will still, of course, find all the best deals on the bullion and bullion storage at sprottmoney.com. So check us out, Monday, this coming Monday, August 24th for a brand new and improved sprottmoney.com. I don't know if there's much we can do to make a brand new and improved Eric Sprott, but, hey, I think you're doing all right and we'll talk to you again next week.

Eric: I will look forward to it. I hope we get a rally here in the gold price. I mean, they kind of have their way for the first hour or so. But we're working our way back here and hopefully, we can lay strong clothes and launch into a great week next week.

Craig: It's gonna be interesting. All right, my friend, have a great weekend.

Eric: Okay, you too, Craig. Bye now.

Craig: And from all of us at Sprott Money News, at sprottmoney.com, thank you for listening. Have a great weekend.

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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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