Weekly Wrap Up

World Events “Building to a Crescendo” for Gold and Silver - Eric's Weekly Wrap Up

As we barrel towards the U.S. election and Fed meeting in just two weeks, things seem to be coming to a head for precious metals investors. But will those events provide clarity or more chaos? Host Craig Hemke and legendary investor Eric Sprott break down all the gold and silver news you need to understand what lies ahead.

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

  • The compelling case for gold shortages
  • What a Biden victory would mean for physical demand?
  • Plus: Why gold and silver prices always seem to move in tandem?

“I didn’t stay up to watch the debate… CNN said that Biden won it 54-39 and Fox said that Trump won it 74-24. Now that leaves a lot of room for error. And it was kind of like this at the last election. And my own personal view is that everyone’s #1 concern should be personal safety. And because of the chaos that’s gone on in so many places, safety might end up being the #1 issue. And I think it favors Trump.”

To hear Eric’s full thoughts on the week’s gold and silver news, listen here:

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

Craig: Hello, again, from Sprott Money News at sprottmoney.com. It's Friday, October 23rd, 2020. And it's time for your "Weekly Wrap-up." I'm your host, Craig Hemke. And joining us this Friday is Eric Sprott. Eric, good morning.

Eric: Hey, Craig, good morning. It's actually afternoon where I am. But we've had a sort of a decent start to the day anyway. And it looks like we might actually have an up week when it was all said and done and all sorts of activity going on. So, let's have at it.

Craig: Yeah, it's been a crazy week. It feels like the metals are down. But actually, as we speak, gold is up about $5 in the week. So, that's a little itty bitty green candle, and silver is up nearly 2%, which it doesn't really feel like it. Now, as we mention that, understand that it's always a good time to buy physical metal, especially with everything that's going on in the world. And don't forget that Sprott Money is running our annual autumn sale right now, till the end of October, which is like, almost here believe it or not. We only got eight days left.

So, don't miss this opportunity to rake up some savings. You can, of course, visit us at sprottmoney.com, or just pick up the phone and give us a call at 888-861-0775. Eric, a lot going on this week, even though it seems like we're building to a crescendo in two weeks with the election and the next Fed meeting. What do you have on your mind as we get rolling here on a Friday?

Eric: Well, it's interesting. I didn't stay up to watch the debate because there's some weird time where I am. But I found it rather interesting where I am. I get the CNN, and I get this information on Fox and CNN said that Biden won at 54 to 39. And Fox said that Trump won at 74 to 24. Now, that leaves a lot of room for error. And it was kind of like this at the last election. And my own personal view is that everyone's number one concern should be personal safety.

And because of the chaos that's gone on in so many places, safety might be...end up being the number one issue. And I think it favors Trump. So, I wouldn't sit here and say that there's a lot here for Vice President Biden right now. It'll be very interesting to see what happens. And as you say, we've only got what? Ten or 11 days left. So, it'll be interesting.

Craig: Okay, what else have you seen this week, Eric?

Eric: Well, I've been watching the COVID thing, because the case numbers seem to be exploding. And the thing I find the most amazing, when I go over and look at the numbers in Asia, and I see China with 18, and South Korea with none and Australia with 26 cases and Indonesia, with very few cases, considering it's such a large country, what is it that they're doing that we're not? And I have no idea what it is. I don't pretend to be a medical expert. But some part of the world it's not a problem, in other parts of the world it is seemingly a problem.

So, I would suggest that those parts of the world where it's seemingly a problem, why don't they talk to the guys in the other part of the world where it isn't a problem, and see what we could all do differently? And it sounds to me, I've already imagined this that there are solutions that are not just locking down, and we should be investigating those.

Craig: How about in the golden and silver world, Eric? We've seen some interesting numbers around the world about silver imports and exports, and it certainly seems to be picking up.

Eric: You know, one of the funniest ones, and I think I even mentioned this one or two times ago. I'm always intrigued by what's going on in India. And every time I search Google for what's going on in gold in India that always nobody is buying any. Okay. And as I said, then, and then they bring the numbers, you find out that whatever you read that month was always wrong. And we finally got the import numbers for August. And quite frankly, they were a stunning 58 tons.

Why do I say stunning? Because about four months ago, there was almost zero imports into India. And let's round the 58 to 60. That's an annual like 720 tons in a 4,000-ton market. That is not a small amount of gold to be importing. So, it was very interesting to see them coming into it. I watched a presentation of Andrew Maguire, where he spoke about the Chinese buying dore bars in Africa and South America. And that was kind of a new model for them.

And that data may not even get recorded because it doesn't go through a refinery. So, to me, if we have India and China coming back in here, and we have the investment demand remaining the way it is, and the COMEX deliveries, I think we can make a very compelling case for gold shortages. And while I'm on the COMEX, I found it rather interesting. I plot every day the change in deliveries, open interest, the change in the spot month open interest, which is very intriguing. Like, this is almost every day. The open interest in the spot month goes up.

And so, for example, in the last 2 days when we hit the big update and the big down day, the open interest was down by about 2,500 tons...oh sorry, 2,500 contracts. But the deliveries were like 1,500. And the open interest in the spot contract went up by 1,000. So, the decline in open interest was exactly equal to the deliveries. And of course, that excludes the EFPs, exchange for physicals, which were also another 6,000 contracts. So, I think things are getting tight on the COMEX.

One other thing that Andrew Maguire mentioned, he says, "Well, you know, these guys who want to buy gold, they just go to the COMEX now. They go right to the COMEX and say, 'Hey, I'll...fine, I'll pay spot. Here, sell me 500 contracts.'" And you see it now on a daily basis. So, and that's different, because in the olden days, you know, we traded...we would always trade gazillions of ounces. No one would ever take any. And now, of course, the shipments for the month of October are going to be stunning. They were well through 30,000 contracts. It might be at 35,000 contracts when it's all said and done.

So, I mean, that's a lot of ounces and tons of gold, over 100 tons of gold. So, the COMEX is doing their part. The Indians and the Chinese are doing their part. And I would say the investors, we're all doing our part, too, and that goes for both gold and silver. I always find it interesting that, you know, we supposedly...we don't even produce a billion ounces of silver, let's use a billion because it's an easy number to work with. That's 25 billion in value. And maybe 10 billion of that is available for investment.

And the COMEX, as an example yesterday, traded 8.8 billion of silver that day. And that's not including the LBMA. It's not including Shanghai Gold Exchange. I mean, anywhere else, it trades...I mean, we trade all the investment silver every day, which boggles my mind that how was it that we can't get a shortage when I can tell you that there's so many investors that are now looking at and buying silver? There's going to be a shortage here. I'm pretty convinced of it.

Craig: What do you make, Eric, of I guess, these big banks? I wrote about this, this week. The piece is at sprottmoney.com with some of the other fine analysis. It's there from a whole host of writers. If you've never checked it out, there's all kinds of great information there. And the thing I wrote this week was about all these big banks outside, of course, of JP Morgan, who is conspicuously absent in upgrading price targets for silver and gold, but all these big banks coming in now with really big price targets, $40, $35 for silver, a lot of it on expected demand if there is a Biden victory, This industrial demand. What do you make of all that?

Eric: Well, you know, I'm actually doing some work...we're going to do some of our own work on silver supply and demand. I mean, supply is pretty easy, because that number is somewhat readily available. The demand picture is very, very tough. I've never really relied on the services that supposedly analyze demand for silver. It's been the same guys for the last 30 years, and I've never believed a word they've had to say.

So, I really think that we got to get right into it ourselves. But I was speaking with Keith Neumeyer of First Majestic this week, and he was commenting to me that I think last year something like there were 2.7 million electric vehicles, of the 19 million produced or sold that year. And as you know, almost everybody is mandating that everyone goes 100% electric, with some date, some end date.

And, and of course, the electric vehicle will consume three times of silver as a conventional vehicle, internal combustion engine. So, when you think of what could happen to silver demand in a market where the supply is not going up, where the investors are snapping this stuff up like crazy, even the U.S. Mint apparently had a great third quarter in selling silver coins. And it looks like they'll have a great fourth quarter in selling silver coins, notwithstanding the ridiculous price they're charging of $67 for an uncirculated coin per ounce of silver.

So, I think there's a great story there. You know, we've got the solar evolution. We got 5G, which apparently uses more silver. And I want to get to the bottom. In fact, if anybody knows, you know, what those data are, if they could pass it on to me, I would be very, very thankful that I have that information. But I think there's a real story shaping up in physical silver here.

Craig: All right. Hey, before we get to some of the company-specific questions, I have a couple of general questions I thought would be fun to drop on you off the list. Of course, appreciate everybody sending in their questions every single week. This week's list was about 90 questions long, so we can't get to all of them. But there are some that we can always try to get to. And I thought this is fun, that's right with what you were just talking about.

Somebody wondering, why do gold and silver prices always seem to move in tandem? I know, they're both precious metals, but with silver's high industrial demand, one would think their charts would be more erratic relative to each other.

Eric: I sort of laugh at that question. Because all I think of is the cabal, right? I mean, you got the same eight banks trading silver is trading gold. And they just, they use one to move the other, and the other to move the other and whichever...and typically silver is the more vulnerable because it's such a small market. I mean, some guy comes in there with, you know, $500 million order, I mean, it's all over for silver. Excuse me. So, it's the same guys trading it. I mean, who in their right mind would be trading all the silver produced in a year in a day? Who are these people? They're the same group of guys. Okay. So, that's why they go in tandem. They all work together on it.

Craig: Well, and here's one more for you from the list. Again, it's fun to kind of double back to these every once in a while, because it seems like you and I talk about this so much we just assume everybody is all on the same page but apparently...but you know, we're still trying to educate and get people's eyes open. And so I thought this was a fun one. The question is not about precious metals, specifically, but about the money supply. This person says they saw a chart in a video that showed that excess reserves at the Fed were tracking the base money supply almost perfectly. So, is this because the QE is only ending up as excess reserves with the whole purpose being only to keep the financial system afloat?

Eric: Well, for sure the QE is. I mean, we know that, that that money that the Fed put out there, basically when you're buying bonds, you're buying it from the banks, so that they can strengthen their balance sheet. So, there's no question about that. I don't pretend to be an expert on money supply. I think one of the better writer...the best writer on it is a guy named Alasdair Macleod. He works for Goldmoney. He does very good work. And of course, there's many, many others that are dealing with it all the time.

And I mean, the money supply is crazy. And we had to bail out the banks beginning in September of '19 when the LIBOR...not LIBOR. There was a rate that went up 10%...

Craig: And repo?

Eric: ...intraday. The repo, yeah, the repo rate. And so that's when the whole bailout of the bank started. And, of course, COVID-19 just gives them even more reason to print money. So, it's all about supporting the banks.

Craig: All righty. All right, again, thank you, everybody, for sending in your questions. Again, you can always use the email address the word submissions@sprottmoney.com. A lot of people wondering, Eric, about the news release this week from Kirkland Lake, using the word "exceptional" when that was their word for describing the grades that they'd intersected. Of course, they've set their next earnings release and conference call for November 5th as well. What do you think there?

Eric: Well, you know, it was a very Fosterville like drilling result. And it was on...the thing that impressed me the most was on something called the Amalgamated Break. And the Amalgamated Break runs east, west. And it's south of what they call the main break, which has been mined for 100 years. And I think the main break, look, I could be wrong, but it's five to seven miles long. It's produced something like 25 million ounces. And then a number of years ago, Kirkland Lake found what was called the South Mine Complex, which went south from the main break. And now it appears it's gone all the way over to the Amalgamated Break. And in fact, that gold might have been sourced from the Amalgamated Break, because the drilling results that they released are way better than the results that the main break had.

And I've spoken about the Amalgamated Break before, and I suspect that it's a very, very major discovery, and that it can lead to significant increases in production, much like Fosterville. When Fosterville came up with those great grades, they were producing about 120,000 ounces a year. Here we are, let's say 5 years later, they're producing almost 700,000 ounces. And they produce those 700,000 ounces from less tons of ore than what they mined five years ago. That's what grade does for you.

And then when you start getting things like 200 grams a ton, I mean, my goodness, that compares to, you know, they mined probably 20. That's 10 times better. You know, you mine one-tenth of the ore and get the same production. So, I found it to be a very interesting release. I'm involved with a company called Mistango, which owns properties to the west along the Amalgamated Break. And I bought it simply because it was an extension of the Amalgamated and the main break. And maybe, you know, they'll get lucky up there. But I think the Amalgamated Break is going to have a whole new interpretation in a geologic sense.

Craig: And they've already said that their average price for gold in the 3rd quarter was about a little north of 1,900 versus the 2nd quarter a little north of 1,700. And that they're increasing their dividend. I would think their earnings are going to look pretty good in a couple of weeks.

Eric: I would guess so. You know, and they sold some shares [inaudible 00:15:19]. And they got, what is it? Like, $820 million or something like that in the bank. So, they're doing pretty well. As we discussed last week, their production out of Macassa, which is where this Amalgamated Break is, was not so great in the quarter, but with those kind of grades staring them in the face, it'll get a lot better.

Craig: Yeah. You mentioned owning a company along that Amalgamated Break. Along those lines, there's a company that I met with the CEO this week, a company by the name of Great Thunder, which has, I guess, kind of a similar idea behind it up there where Wallbridge and Balmoral?

Eric: In Fenelon, yeah. Yeah, they staked north Fenelon, and I gather south of Fenelon. And they've tried to stay active in the area. And it's what we call closeology. You know, there's obviously extensive gold showings in that whole Sunday, like, deformation zone that goes east, west. And also, there's been lots of indications of it going both north and south as well.

So, Great Thunder is north and south for the most part. Maybe a little bit to the west. I'm not certain of that. So, it's a play where, you know, if Wallbridge keeps expanding the dimensions of the geologic distribution out there that Great Thunder hopefully can end up with a pretty interesting property.

Craig: A couple more that kind of go hand in hand are American Creek and Teuton.

Eric: Yeah, well, American Creek came out and announced that they're going to split into two companies, one that will own their interest in Treaty Creek, which is where Tudor and Teuton and American Creek all have an interest. And then the other remaining assets they have, properties they have, and royalties they have, things like that, will go into a separate company. And of course, I think that's a very good idea on their part because you don't get value for the other assets. And yet those other assets, knowing that they're up in the Golden Triangle in British Columbia, can be very, very valuable.

And I believe that's true of American Creek and of Teuton. And American Creek has a royalty on Treaty Creek, and Teuton has a royalty on Treaty Creek. And those royalties are very, very valuable. So, I admire that they decided to try to create more value for the shareholders by splitting the company up.

Craig: A number of people this week asking about Excellon. Anything you can add there?

Eric: Sure, well, I mean, they brought up the quarter, which was not inspiring. They've had issues there with recoveries and mining and things like that. But you know, the price I think is going up. The price of silver is going up. Things can change rather remarkably in the metals business just with prices, and improvements in mining. Hopefully, that will occur going forward. There's some suggestion of that I think in their quarterly release. Plus they have a silver property in Germany that they're going to be drilling that used to be a silver mine like 100 or 150 years ago. Those are always great things to think about because they're probably producing silver at 50 cents a pound back then at that time. So, you can imagine what the grade had to be to make it profitable. So, but I haven't heard any results from that yet. But I'm kind of intrigued by what could happen.

Craig: Here are two that I always kind of have together in my mind whenever I see them because they're always in capital letters, Amax and MAG.

Eric: Yeah. Well, Amax, they brought out an interesting hole. Unfortunately, I haven't had a chance to chat to the company about the geologic significance of it. But it was a fairly wide intersection of very good grade. And that property in Quebec, in the Abitibi again, it's like it just keeps getting bigger and bigger all the time. They got a big program going on. It's been a great performer. And I suspect that there's lots of great days coming forward. MAG Silver, I'm a decent owner of MAG Silver stock. Might have actually touched a record high there on Wednesday, they got the 24, 20. It might have been a record closing high.

And they just started producing from the Juanicipio Mine. They just did modest. It's sort of like pre-production if you will through awesome cash flow, which helps offset the CAPEX expenditures. But that's a very, very high-grade ore body that will be in production I guess starting...full commercial production by the end of the first half of '21. And that could be very interesting knowing where silver might be by then. So, I like it and I think it's a great investment for any institution interested in sinking money into the silver business, as would SilverCrest be the same kind of thing.

Craig: Eric, how do you remember all these districts, like, Juanicipio and all the...? I mean, it's... Where do they come up with these names in the first place?

Eric: There's a lot of names, believe me. And sometimes they use the same name but it's a different mine. Right? The San Juan Mine, or the San Dimas Mine. And meanwhile, you find at least five of them somewhere, and...

Craig: Right. Why can't we get our own district?

Eric: It's just from hanging I think...hanging around in bad places.

Craig: We need to get someone to name it the Eric and Craig District. That'd be easy to remember.

Eric: There you go. There you go.

Craig: All right. How about Kore?

Eric: Well, Kore announced some drill results from their property in BC. They've announced that they've had a number of cores that have visible gold. We don't have assays yet. But they're suggesting, you know, that they have 20 kilometers of interesting strike here. And that they've already got the physical gold in the core. And we'll get the results sometime in early November. So, it's one to watch.

Craig: And just two to go. Do you have any thoughts...anything new on Wallbridge?

Eric: Well, yeah, they brought out some results on the Tabasco and these were what they call wedge holes where you wedge a hole off of another hole, and you maybe move 25 meters in one direction or another. So, there's not a big step out. And they were wonderful intersections. But I would say that they're not far enough away to make a meaningful difference to anyone's interpretation of the size. I mean, yes, they're very constructive to know that the structure was continuous, both up and down and sideways. But the more important thing for them...and unfortunately they haven't been able to drill deeper on the Tabasco and the Cayenne and places like that. They got to wait for the ground to freeze to do that.

That's really... We need something there, and or something on the Balmoral grounds, which, of course, would extend things for quite a distance and give one the opportunity to think, "Okay, now, this is really getting big here. So, I still own every share I've ever owned. And, you know, between the price of gold and the continual drilling, I'm sure we'll have lots of good results in front of us."

Craig: And let's wrap up with something completely new. I've not heard of this one before. A company called Unigold?

Eric: It's something that I have an interest in. It's in the Dominican Republic. And they announced that they had 14.9 grams over 14 meters, and in the same hole, 6 meters at 10 grams. Those are pretty good holes for a guy with a market cap of like $40 million. And I do believe they have a known resource already that's in excess of a million ounces. Now, I stand to be corrected on that, because it just came out...these results came out this morning, and I haven't really refreshed my mind on what I'm supposed to have known about it already.

But those results were somewhat stunning for someone who has, let's say, a million ounces of low grade, and all of a sudden you hit this high grade in two structures. So, another one that people might just take a look at.

Craig: That's all I have, Eric. Anything else on your mind as we wrap up this week?

Eric: I don't think so. You know, I think...I love the study of the physical markets here. I think we're shaping up pretty good. It could be stunning, what could happen quickly. So, let's hope it all comes together.

Craig: And to that end, did you get a chance to listen to the "Ask the Expert" segment with Chris Vermeulen yet?

Eric: I did get to listen to that. And I...of course, I admire Chris and his work. And as he says, if the GDXJ gets through 60 instead of 57, as we speak, it could rally as much as 60 odd percent before year-end. Boy, would that make a nice Christmas present. So, here's hoping that that might happen.

Craig: Yeah, absolutely. Again, what we're talking about is our monthly "Ask the Expert" segment just posted yesterday or the day before, this month's version with Chris Vermeulen of The Technical Traders. You've heard Eric mention his name quite a few times on these podcasts. It is now available on sprottmoney.com, and also on our YouTube channel and at SoundCloud. Whatever channel you choose, just be sure to like and subscribe if you're enjoying these weekly wrap-ups and of course, those "Ask the Expert" sessions. Eric, it's always a pleasure to visit with you. Thank you for all your time today. I look forward to talking to you next Friday.

Eric: Okay, Craig, all the best. Have a great weekend.

Craig: And from all of us at Sprott Money News and 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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