“Why I got into gold in the first place.” Eric Sprott- Weekly Wrap-Up (Nov 23, 2018)

Transcript:

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's Friday, Black Friday as they call it, November, 23 2018. This is your weekly wrap-up. I'm your host Craig Hemke and joining us again as usual this fine Friday morning is Eric Sprott himself. Eric, good morning.

Eric: Hey, Craig, good morning. Lots going on in the various asset classes, most of it not good. And gold, silver seem to be hanging in there, and maybe as these markets continue lower or they will come here.

Craig: Well, and I mentioned Black Friday as we get started here, Eric, I know you're headed out to the mall this afternoon. It is Black Friday. It is in full swing today. So, of course there are great deals at Sprott Money. Head over to sprottmoney.com to get the cream of the Black Friday crop. You can buy a 1 oz. silver American Eagle any random year for about $2.99 over spot limited quantities on these babies today. So, again, go to sprottmoney.com or call 888-861-0775 for more details.

Eric, let me lay some details on you. That that nice guy Louis Cammarosano, at his side always keeps track of all this different sovereign and country metal demand month by month. He had three straight reports that came out this week, two of them dealing with India. Indian silver demand is now 5,070 metric tons through September. I mean, that puts them on a run rate of 6,800 metric tons or about 25% of mine supply this year. Indian gold demand is on a run rate of 800 metric tons, that's about 30% of mine supply. And then you got the Russians as well, you know, they are steadily adding 2,830 metric tons a month it seems. They're going to swallow up about 280 metric tons this year. That's 10% of mine. So, India and Russia themselves are at 40% of mine supply this year and price goes down, Eric.

Eric: Yeah. Well, first thing I'll say about India as I read about India during the month it's always bad, okay? Indian demand is down, price has gone up, nothing is going to be...and then when they produce the results for the month they're always great. And it's shocking, you know, these numbers. Every article I read on India says that the dealers say demand is weak. And then you turn around, and bang, you know, you've purchased whatever it is 80 tonnes in a month, which is just some incredible number.

Same with the silver, I mean, the silver number is even bigger. It's part of world the silver supply. And of course, the Russians are steady state here. And, as we talked before, we have other banks that have now come in into the...in fact, the Bank of India purchased not that long ago for the first time in years. So, I think people are seeing the wisdom of owning gold and I think people watching markets around the world, including the India Sensex and the Russian, whatever their exchange is called, and that are probably down 25% already. I mean, the logic alone in gold, which in those two currencies is probably very strong, by the way, makes a lot of sense. And it's going to make sense to a lot more people as time goes on here.

Craig: And the last time Indian silver demand was this high was 2015. And I think everybody remembers what happened in the first half of 2016. So, maybe it will be setting up for something like that again. But Eric, I tell you, everything's a little down this morning and it's all on the back of crude oil, which is now down near $50 a barrel. It's down 30% in six weeks. What does this mean for inflation with the Fed's plans, everything else?

Eric: Well, I guess it's great for the consumer, of course, because he's saving money. But it's certainly not good for corporate earnings in the sense that the oil companies have now lopped off 30 bucks a barrel and it's not as though they were making much the way a profit anyway. So, we could see a bit of carnage there. I think it's a statement. As I prefaced at the beginning, it's the asset classes, right? All asset classes are pretty well plunging here, you know. Now we see oil and gas are very weak, we see the stocks are weak, groups within the stocks, cryptocurrencies, I wanna make a statement about cryptocurrencies. Sort of reflecting back to the various conversations we've had about cryptocurrencies and I've always steadfastly said, you know, I don't get it. I don't believe it. I can't get what's happening there. You know what? I rest my case. You know, down by 80% in the year. I think Ethereum is down by like, 87%, something like that. I mean, it's over. It's over. I don't know what happened to the world and it's sort of this herd mentality, which is a bit bothering when you look back at it now, the fact that the herd all went there. We have the same thing happening in the Cannabis stocks up here. Everyone's gone there.

Now, they're falling out. Everyone went to the FAANGs. Now, they're in a bear market. There's been some death crosses there in the Russell 2000. The junk bond market's getting weak. Probably one of the month's biggest standouts was...I think it was on Tuesday when a bunch of retailers and U.S. retailers reported their earnings. And they weren't that bad. All the stocks got bombed. I mean, I could hardly believe it. So, it's like people are just waiting for a time to sell. They're all sitting there in the weeds and, you know, if there's any volume and a bang out goes the stock. So, we have many issues in asset classes here. And of course, by the same token as we've already talked about gold the demand seems to be broken up here and the gold price is okay. This is one of the few times we've recorded this with the markets open and whatever gain we had on Wednesday after the two huge decline days on Monday and Tuesday has been wiped out already. And the weaknessing at the close, I mean, the Dow was up 150 points on Wednesday, ended up down a point. Like it's the opposite of what we used to have, how we used to rally into the close. Now, it fades into the close, so we have a different market environment and people should be adapting to that.

Craig: Yeah, and you and I have talked about this FOMC meeting that is coming up in December, and there's a lot of talk now about at least changing the language and whether the Fed would reverse course which you and I have discussed this now for months, that they are going to reverse course in 2019. At some point that's going to begin to get priced into metals too, don't you think?

Eric: I would think so. Maybe, you know, the announcement of the December hike, if there is a December hike. I mean, the things that interest rates are affecting are the worst performing stocks. I mean look at the whole housing thing and now autos. I mean, you don't have to be a genius to know that people are kind of tapped out here on these increases and interest costs. I mean, they dent your budget. I mean, we talked last week about mortgage rates were up like 150 basis points off the bottom and an increase of something like 40%. How many people could afford to pay 40% on the mortgage and still buy food and whatever, pay their power bills and so on? So, it's a serious problem. The Fed I think has gone this route because they had to try to get back to some kind of normalcy financially, and the getting back to normalcy is resulting in sort of economic carnage here. And I think it will continue to manifest itself in the stocks.

Craig: Lastly, Eric, the mining stocks, and let's talk about them specifically because it's been another challenging year for a lot of those shares. But a lot of them have already kind of washed out it seems over the last couple of months. As we roll into December, we'll get some tax loss selling, but in your opinion and based on your experience, would you expect much of that in a year like this? Or do you think the fact that the shares are already holding in there pretty well here in late November, maybe it's a good sign?

Eric: Well, we've probably seen a lot of tax law selling because the declines were so big so early. And you don't need to wait around till whatever date, you know, December 20th to take a tax loss. You can take it anytime. So, I would think a lot of that's done. As you and I have discussed before, there tends to be a rally beginning the middle of December that will coincide with the rate decision. And normally, even when they've raised rates, gold has tended to go up. So, I think we're probably in a good spot here. We, already cited the examples of physical demand, the [inaudible 00:08:42] has this huge position in the December contract that expires in about five days. I think once that's out of the way, we typically see fireworks once we get through that big delivery month of December. So I suspect that will play out.

And, anecdotally, I've heard that there has been some major institutional accounts asking to various gold companies to come and present their case. Because why wouldn't they? They've been looking around for something that can survive in a crash. And that's one of the beauties of gold. That's why I got into gold back in 2000. I was a long only fund manager then. My God, I got all this money for people, what am I going to do? And it finally dawned on me that gold lets you survive. And quite frankly, I was only trying to survive. I didn't know the stock would go up 1,700% from when I bought them. But that's what happened. And I think the same thing could easily happen this time. I'm not saying 1,700%, but, you know, you start bringing in that institutional demand if nothing's working, and then all of a sudden people see one thing working, that's all. That's way more money than our sector can deal with. So, yeah, it could be very exciting.

Craig: Yeah, I agree with you. I think it sets up for a very interesting end of the year and next year as well. It is Black Friday, I know you've got to head out and get to the mall, my friend. But before you go just a reminder, we talked about the Black Friday deals at sprottmoney.com for silver. We also have them for gold, so, good idea to stop by. You can buy a 1lb. 2018 Gold Maple Leaf for as low as $38.99 over spot. So, of course, you can call us at 888-861-0775, or you can go to sprottmoney.com. Check out the deals page and you'll find all kinds of great stuff there. Even ahead of cyber Monday, which is coming up Monday, there'll be some special stuff there. So, everybody, please check it out. Everybody, enjoy your weekend. Eric, you go enjoy your weekend too.

Eric: Hey, Happy Thanksgiving, Craig. All the best.

Craig: Thank you very much, my friend. And from all of us here at "Sprott Money News" and sprottmoney.com, thank you for listening. We'll talk to yo