Why Silver will be the “Star of the Show” - Weekly Wrap-Up (August 2, 2019)

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Craig: Well, greetings once again from Sprott Money News and sprottmoney.com. It's Friday, August 2nd, 2019 and this is your Weekly Wrap-Up. I'm your host Craig Hemke, and joining us once again this fine Friday to wrap things up is Eric Sprott himself. Eric, good morning.

Eric: Hey, Craig. Good to be here. We're having a great week so far and it looks like it will close up pretty good, so, many things to chat about.

Craig: Certainly, do have many things to chat about. And hey, before we get started, just a quick thank you to all of our friends that came up to Vancouver and visited the Sprott Natural Resource Symposium but also stopped by the Sprott Money booth. We met a lot of nice, fun people, we sold a lot of precious metal, and it was great experience I think for everybody involved. So, thank you, everybody, for stopping by to visit with us. And don't forget now though, there are always deals on the Sprott Money page. Be sure to check us out.

Now's the time to be adding metal to your stack. No doubt about that. So, of course, sprottmoney.com and 888-861-0775 in terms of now being a great time. Eric, let's just dive right in. We heard the news this morning, the U.S. jobs report, not only was the supposedly great number of last month revised significantly downward, but the details of today's report were no good either. What do you think about the news today?

Eric: Well, basically the report was weak. I mean, everyone...the expectation was 165, it came in at 164, that's no big deal. Wages were up 0.3 in the month, so that's 3.6. So, it's a little bit more inflation, which I guess is good for the worker. But the thing that's bad for the worker is the average workweek was down 0.3 hours. Now, people may not think that's much, it's almost 1% of the number of hours that the average person works, which means that, collectively, everyone made 1% less. And they made 0.3% more per hour, but they worked 1% less time.

So, that's not a very constructive number in terms of the total paychecks that were issued. And as you pointed out, I mean, the revisions to the jobs, we lost a total of 40,000 jobs from the last two months. So, I mean, if you took them off the 164 you're net 124 which is kind of weak, I'd say.

Craig: Yeah. Accepting the beating that we took four weeks ago today because allegedly, the U.S. economy created 224,000 jobs back in June, and then they revised that down to 193,000. But that always seems to get forgotten at the end, doesn't it?

Eric: Yeah. It's amazing how many data points get revised and they always get revised lower. And, of course, the disgusting thing for you and I is that when they come out with these numbers, the cabal uses it to slam the gold price, which we have to put up with it. And ultimately, we've recovered here and in fact, I might just go right onto something else. I mean, I'm looking at some of the physical attributes of the precious metals here. And, you know, for example, we had central banks buy 224 tons of gold in the second quarter.

Well, if that's 900 tons annualized, that's a quarter. Almost a quarter of all the gold that's available. And I might point out that about a decade ago, these guys used to sell 600 tons a year, and now they're buyers of, let's call 900, and that's a 1500 ton change in a market that hasn't grown much, like, hasn't changed much from 4,000 tons. So, how that happens, I don't know. We have the ETS piling in. The ETS bought 126 tons of gold... ETS bought 126 tons in June.

Oh my God. Last year, I think the ETS might've disposed of, I'm making up this number, but let's say 250 tons. Imagine if they annualized 126 sets of 1400 tons of net new buying versus 250 tons that they supplied last year. There's a 1600 ton delta in a 4,000-ton market. Is it any wonder that they can't get the fake price of gold down in the Colmex? Because the physical buyers keep coming in and same with silver. They keep trying to knock it down, their short position keeps going up and we just march on here. And I think we're essentially at a crossroads where it looks like there's one asset class that is working, well, two, the bonds are working and gold is working.

But the shares here may come under some pressure because I don't think the economy is nearly as strong as it's been suggested and that's why we have rate cuts. And certain people that I follow, a fellow named Christopher Nelan [SP] who has been very good in the gold price, but, you know, we might be close to a market break here. He's also suggesting we could get some kind of parabolic move in the gold price, which, of course, would be more than welcome to all our listeners, maybe up to like $1750 here, not too far down the line. There'll be, if it happens, there'll be a lot of opportunity in the gold and precious metal space.

Craig: Eric, two things that you just mentioned that came to my mind. Did you see the story this week about the European central banks not renewing their agreement from 1999 to coordinate their gold sales? Obviously, nobody is selling gold, but did you attach any significance to that?

Eric: Well, I think there is a significance to it that, you know, probably some of them want to become buyers. I think most those banks that sign that accord, I think they were only 11 banks, you know, maybe the odd one wants to buy and they're looking at this agreement they have and they maybe under the agreement they can't buy gold. But, you know, there's such a plethora of central banks buying it makes other central banks think about it.

"How can you let 11 guys buy and you're nowhere, you know, what are you thinking? How are you handling your job here?" So, it could be that other banks want to come into the game here. That's what I'm hoping. But it's significant in the sense that you won't have meetings where they're all deciding how much you're going to pound the price of gold down, so, that's encouraging.

Craig: Well, and the other thing that came to mind then too is, you mentioned silver, and we probably should address the underperformance of silver, because, again, here, this week, I mean, gold's up more than 1%, 1.5% really as we speak, and pushing towards $1450 while silver's down again. And I've been telling folks on my side, I wouldn't be surprised to see the gold-silver ratio go to 100 before silver finally breaks out. What do you think, I mean, besides the obvious, that the banks are restraining pricing and controlling the market, what else is holding back silver?

Eric: Well, first of all, I think nothing's going to hold back silver. Okay. Silver got up to $1650 probably three days ago and then we have this fed rate cut where all of a sudden the prices of gold and silver goes down, silver more than gold. But we're coming right back up again. I'm absolutely convinced silver is going to be the star of the show here. In fact, I saw a data point that suggested that 2,000 tons went into ETFs in July. 2000 tons.

Craig: Wow.

Eric: We mine about 2,200 tons in a month. 2,200, and 2,000 tons when in ETFs. You know what? I'll guarantee you it didn't go into ETFs. It's fake silver that went into the ETFs. There's no way that you could mobilize the purchase of 2,000 tons of gold to go into ETFs. Yes, people think they're buying it, but I would guess that the silver is not there. But it just shows you, you know, the universality of people being interested. And I think it's not mostly coming in the U.S., I think a lot of it is really offshore. And now that we all see what gold and silver are doing and gold's potentially breaking out here, silver will not be far behind and I think you're going to see an even bigger tsunami into these ETFs.

And I don't know how they're going to hold it back. I mean, you can almost sense there's going to be poorest Missouri right here, you know, that the CME will come out and say, "Okay, fine, fine. There's no silver, there never was any silver and we're just going to settle at some dollar value and the dollar value will be let's say $1650 or something." And then we're all out of here. So, we'll see.

Craig: All right, my friend. An interesting week in all of the mining shares as well. I know the...prepped us a little bit for the earnings release for Kirkland Lake, which came out earlier this week. What else was on your radar this week?

Eric: Well, let me just talk to the earnings. I suggested they could be something like 45 cents, they came out at 50. But 3 cents of that, my error was that they changed a write off of exploration policy, which benefited them to 3 cents in the quarter. I think you had a little change in the depletion policy, which might've added a penny or two. So, I really think, you know, on an ongoing basis or compared to the first quarter, the earnings rate were around 45 cents. But, they spoke very highly about how much their production should be up in the second half. I think there could be some great drill results, like lots of opportunity both in Australia and Canada. And as I sort of plot out what kind of numbers we could get in the subsequent quarters, I'm kind of looking around 70 cents is a number that I think should be attainable if they do the kind of production they're suggesting and if the price stays where it is. So, it looks pretty good there.

I have a couple of other companies that did some transactions in recently. One of them is Tudor. They announced a very big step old hole. It was something like 700 meters of...yeah, 770 meters of 0.68 gold, with the upper portion 250 meters of 1.2 grams of gold. That was a very, very good hole and it was a big step at 150 meters step out creates huge increases in tonnage and they're going on further, so, fingers crossed on the next hole. I also participated in a small issue for a company called Teuton resources that, along with Tudor, Tudor owns 60% of Treaty Creek and Teuton owns 20%.

So, they're going to be pulled along with Tudor. And they have an NSRI and the 20%, so I think it's fairly inexpensive stock, I've been buying it this week. I bought a small piece of a company called Chesapeake Gold. That purchase was at $225. The previous high was $17 in 2011 when the price of gold in 2011 was the same as the price of gold is today. By the way, the Canadian price of gold is $1,900 now. That's a record high in Canadian dollars. In Mexican pesos where their deposit is, we're at a record high. So, some of the opportunities are quite stunning here.

In the case of Teuton, I think I paid 22.5 cents and the previous high was $3.50. So I was paying about 6% of its previous high and we have the same price of gold in Canada and we have a discovery shaping up something. Oh, man. How do you miss on this? So, I think there's lots of opportunities out there people want to look around. And, again, one of the things I really do like is silver and we have some other silver things we're working on, hopefully, that come to fruition that we'll get to talk about next week.

Craig: We also had a couple of names sent in to us this week. We take questions from listeners. You can always tweet them at us, you can email them to us and we try to get to them each week. And I had a couple of names come in this week. We'll just close by...let me lay these on you. If you have any opinion or if you even know of the company, just let me know. We had the question about something called Fresnillo. Do you know anything about Fresnillo?

Eric: Well, of course, I know about it because it's a major, if not the largest, silver producer in the world. It could be some Polish companies are a little bit bigger than them. Very, very large in Mexico. I have not been a student of Fresnillo. And the only reason I have not been a student of Fresnillo is because it's so large in market cap that somehow, you know, I always prefer small market cap companies to large market cap companies because there's more action there. So, I don't really have a qualified opinion on Fresnillo, but it's been around a long time and they got great properties.

Craig: How about First Mining Gold Corp or Mexican Gold Corp?

Eric: Well, I know First Mining and I'm a shareholder of it. I bought it when it first came out. Recently, I met the management of the company. They have...their ammo is to buy properties early and hope that a price change brings them onto the playing field in terms of increasing the value. I suspect that will be happening here with the way gold looks like it wants to charge higher. I haven't been a buyer recently, but I own a small piece of the company.

Craig: And this Mexican...

Eric: The other one...

Craig: Yeah.

Eric: Yeah, I don't know Mexican Gold Corp, so, I can't help you there.

Craig: And how about something called Lee Gold? You ever heard of that one?

Eric: Well, I've looked at Lee Gold. I don't own it, so I really can't comment on it. I just don't have enough information that would be worthwhile.

Craig: Fair enough. And here's one last question. This comes up quite a bit actually. Folks often own physical gold and silver. They keep it in their safe or they keep it in a storage account at a quality company like Sprott Money. But what if your assets are tied up in some type of retirement plan? And that's where most folks have a lot of their assets. They are still in their working years and saving an either IRAs in America or RSPs up in Canada. What do folks do that have a most of their assets in qualified retirement accounts?

Eric: Well, my understanding is that Sprott Money has arrangements to buy gold and silver in RSPs. There's also some of the ETFs that trade out there, for example, the Sprott Physical Bullion Fund, the Sprott Physical Gold Fund, that trade on the New York and Toronto Stock Exchanges, those represent ownership of gold. And there's other ones, of course. So it's a wide-open area as far as I know, that anybody with an RSP can certainly get very, very involved in precious metals ownership through certificates of physical gold. And I think Sprott maybe has...Sprott Money has an arrangement where you can own the physical product in the RSP. So, they should check that out.

Craig: That's exactly right. And for the person that sent that question in, you just need to go to sprottmoney.com and you'll find out more details, or, of course, you can always call us at 888-861-0775. We will even store your metal for you as well, physical metal storage, great service that Sprott Money provides six locations around the world, and got to hold that stuff someplace. And if you don't want to hold it in your own vault then hold it in ours, and we will, of course, protect it very well for you. Eric, my friend, let's see if we can protect these prices for another week. Another up week at this point it looks like. I look forward to talking to you next Friday and see what the world has in store for us.

Eric: You know, one of the things, Craig, that we've never really discussed was the stunning reversal in gold and silver...

Craig: True.

Eric: ...yesterday. I mean, that's almost unheard of for gold to go down to whatever $1401 or $1402 and close at $1445. That's unheard of. I mean, you hardly ever see that. And the same with silver. We got well into the $15s and closed at the $16s. So, I think it just, it's a statement about how held together this market is. The physical market for gold, not the fake market on Comex. And those guys, of course, try to drive it down and they just got their butts kicked yet again. And let's hope that that's what continues to happen in the ensuing weeks.

Craig: Let's do this. Let's exactly hope for that. You're right. That was a fantastic reversal yesterday, and not something we're accustomed to seeing. No doubt about that.

Eric: It was fun.

Craig: It was fun. Well, you go have a fun weekend, my friend.

Eric: Okay. All the best to you, Craig.

Craig: 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.