“When The World Decides To Get Into Gold, The Price Will Go Up.” Weekly Wrap-Up (Feb 15, 2019)

Male: 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, February the 15th, 2019. This is your Weekly Wrap-up. I'm your host, Craig Hemke and joining us with Eric Sprott. Eric, will you be my Valentine?

Eric: I think I'm taken.

Craig: Oh, darn it. It's a day late for that anyway, isn't it?

Eric: And my wife is in earshot too.

Craig: Aha, okay. Well, so much for that idea. Hey, Eric, it's been an interesting week. I'm looking forward to getting caught up with you. Before we start though, I mean, now, that the Valentine's Day behind us, that means we're in the second half of February. And RRSP deadline is coming up on March the 1st. Holy cow, I mean, that's only two weeks away. And of course, people need to understand. You can add precious metals to your registered investments. That deadline, two weeks from now. So make sure you diversify your RRSP portfolio with gold and silver from Sprott Money. Of course, you go to sprottmoney.com. to check that out or you just call us 888-861-0775.

Eric, you and I and everybody funding their RRSP are the only people that are adding physical metal at this point. Interesting news. Again, this week China reporting physical holdings, physical additions of gold. They hadn't done anything like that, at least, hadn't reported anything like that for about a year and a half. Then all of a sudden, they added 10 metric tons in December. 12 metric tons now in January. What the heck is going on there, my friend?

Eric: Well, that's a great question. And I really do think it's the highlight of the week for us because it's been absent for so long on a reporting basis. And maybe you and I could get into, "Well, why would they be reporting all of a sudden?" Maybe it's just a bit of a shot for the value, you know. If we end up with tough trade negotiations, maybe they will just divert our surpluses into gold. But the thing I found interesting is that the first month was 10 tons, now it's 12 tons. And they're just testing to see how much they could buy without affecting the market. But notwithstanding, you know, them concerning themselves with that, the fact that they might come in and buy, you know, 122 to 150 tons in a 3,000 ton mining market or fully 2,200 tons if you exclude Russia and China, that's a very significant development.

At the same time, the other central banks are buying. At the same time, the ETFs are buying. At the same time, it looks like coin sales are picking up a little here. We also saw an item on India whose imports in the month of January were up 64%, which is no small amount here. So I think I mentioned a couple of times recently. You know, gold used to kind of get hammered big time and then sort of just stay down there. And it's interesting now when we see these declines that happen quickly, one, they're not major, like they may be $5 or $7. And then it seems to rebound quickly. I get the sense that they meet up with a physical buyer. You know, there's actually a physical buyer there.

And the game might very well be ending, which would be, you know, the best news that could ever happen for our side. You and I always talk about the palladium shortage. I wouldn't be surprised something could go on with silver at the rate that India has been buying silver lately. And then maybe it could morph in into gold there. So I think, you know, we should all be watching very carefully what's happening on the physical side.

Craig: It's certainly going to be an interesting year, my friend. As we've been discussing as the year's kicked off, we got another FOMC meeting coming up next month. And there's really no indication that the Fed's gonna be hiking rates anytime soon. Even just today, we've got some import/export price data that is deflationary. Negative levels. First time, we've seen that and the worst numbers we've seen since the end of 2015. And I think you and I recall what happened in early 2016 pretty well.

Eric: Yeah, that, and I mean, there is a couple of other things. I mean, Governor Brainard has suggested that the balance sheet shrinking should stop this year. We've been studies out by some of the, I think, Federal Reserve Banks with a new modern monetary theory that should only be if we keep printing forever. But it seems to be this buildup of a thought process that maybe we don't want...for sure, we don't raise rates. But more importantly, probably cut back on the bond program. So that's all good news for the market, but it's great news for gold. Okay? Because it's just here we go again. You know, we pulled ourselves out of 2000 by reducing rates. 2007-8 by reducing rates and then printing money. And here we go again. So I think most of the signs would suggest that the smart people are figuring out that gold has become a very, very important ingredient in your portfolio these days. And we see it from some of the smartest people around.

Craig: And it's not just you and I and some of the other smart people out there, Eric. The coming onslaughter, the imposition of the new Basel III rule which is coming up at the end of next month. And maybe that's a little bit behind what's behind driving all of this central bank demand too.

Eric: Well, it certainly makes the central bank of that gold have better access than one with some paper claim on somebody with its tier 1 asset, no capital. And maybe those central banks are to know that the commercial banks will get in the game too. And, of course, as we all know, there's no room for people in the game. You know, essentially precious metals are gonna balance these days, some out of balance like the palladium. I mean, how could people get in the game when we're in balance. And there's such small markets because there are smaller. The silver market is, I mean, the whole inventory we think might be in the world, like $15 billion. I mean, that's just like a nanosecond of buying. So it's going to be very difficult when the world decides it wants to get in gold, the prices gonna go up. And perhaps that's what we've been seeing here this year that the price just keeps going up with more and more people come out and credit gold with being a interesting portfolio asset.

Craig: And you know, Eric, we talk about the miners every week as well or at least, we often do. And they're off to a pretty good start too. You know, for the week, this past week, gold's up a couple of dollars, silver's down a couple of cents. The shares are hanging in there. In the past, it seems like even just going sideways was enough to get the shares to be sold off. So are we beginning to see, do you think some of this may be institutional flow, looking at the relative outperformance of the mining sector versus other sectors? And maybe we'll start getting some funds into the mining sector too.

Eric: Well, you know, it'll be interesting if some of these mining companies could report good earnings because generally...I mean, I sort of looked at the earnings they, for the most part, seem disappointing. Imagine what would happen if, you know, people wanna buy precious metal stock and the earnings are okay. Now, maybe a lot of them are cleaning the decks here. I suspect that Goldcorp is cleaning the decks for the Newmont merger. I think Barrick would clean the decks for their merger. So that going forward, you're able to report stronger fundamentals. But yeah, the stocks have acted well here. And those that have performed, that have actually put some numbers on the table have done incredibly well. And, you know, one of the things I should probably...probably the second most important fact this week was the decline and retail sales in the month of December which were reported down 1.2%.

And apparently, there's a Bank of America index which pointed out there's likely to be weakness in December, but not that week. But it's already reporting that for January, it was weaker. Bank of America's numbers were weaker than in December. So, you know, we end up with back-to-back negative retail sales. It's hard for companies to have increased earnings when sales are going down. So that's something that I'm sure all the people at the Fed and the portfolio managers and others are watching these days. And of course, some of them have already started to cut their GDP estimates for the fourth quarter. And I'm sure that may happen for the rest of this year as well.

Craig: I've seen just yesterday actually, the GDP now figures out of the Atlanta Fed have been cut nearly in half just over the last couple of weeks for the fourth quarter. They're down to just 1 1/2%. Again, it doesn't give anybody any confidence that this rate hike regime is gonna continue. And gosh, like you said, if the Fed starts to turn around and start cutting rates here later on this year, wow, that could really pick up some really interesting both the metals and the shares, couldn't it?

Eric: Sure. And, you know, there's other signs too. There's some business confident measures that are weak. The Baltic Dry Index is down about 66%. As I think I mentioned last week, the class A tracking ordering down by 68%. The U.S. Government federal deficit is up by, I think, it was 41% in the first three months of the year. A whole bunch of signs that all point to levels of concern that one should have about the forecasted strength of the economy this year.

Craig: And then as we wrap-up, Eric, we usually touch base on a couple of specific shares. I don't know if maybe you have any updates for us. Any specific companies you want to address this week.

Eric: Well, I guess the only one I'll talk about this week basically is Kirkland Lake Gold because their earnings will be reported, I think on Thursday of this coming week. And I sort of tongue-in-cheek, I just gonna put it this way. I think the three most important things about Kirkland Lake are Fosterville, Fosterville, and Fosterville. And, you know, as we develop that mind and the grade that we've already announced. And I think Tony Makuch to get to that grade might even go up in the report to be released shortly on the new 43-101. And, you know, the three most important thing about possible are grade, grade, and grade. And if you've got the grade, you can produce a lot of ounces in a hurry. So it'll be interesting to get the update out and have the conference call late next week and just see how well we're doing. Particularly in the face of most of the gold companies, I don't think they are doing as well as people might have hope so. We'll all stand by a match.

Craig: Yeah, yeah, absolutely. It'll make for a very interesting conversation next Friday, I'm sure. And I think as we go through this year, Eric, the demand for gold institutionally retail central-bank level. It's only going to increase, you know, at our level, the retail demand. You just can't go to a better place than Sprott Money if you want to buy some gold, if you want to add some gold to your existing stack, it's never a bad time to do that. And just a reminder for everybody. Sprott Money always has some of the best prices you're going to find on one-ounce gold bars, other gold bullion products. When you go to Sprott Money, check out the deal's page. Go there. You can find whatever the best offer we currently have. Of course, you can always call us too, like I said, 888-861-0775. Eric, always a pleasure. I hope you have a great weekend. And I certainly look forward to talking to you next week.

Eric: Okay. Great. It's been fun this week. And, yeah, we'll be looking forward too. We've got a short week, next week, but maybe we can accomplish in four days what we would've accomplished in five anyway. So fingers crossed.

Craig: Sounds good to me, my friend. And from all of us here at Sprott Money News and sprottmoney.com, thank you for listening. We'll talk to you again next Friday.