Weekly Wrap Up

“An explosive situation.” - Eric Sprott on the state of U.S. politics - Weekly Wrap Up (September 28, 2018)

Head Shot of Eric Sprott Weekly Wrap Up

Sept 28, 2018

As September comes to an end, we put another quarter in the books—and, as usual, Eric stops by to break it all down for us. In this edition of the Weekly Wrap-Up, you’ll hear:

What’s happening with precious metals in relation to the dollar

How the “show” in Washington will affect things moving forward

Plus: the latest on Eric’s favorite mining shares


“Thank God there is truly a market. You know, ‘supply and demand’, and price and all that stuff. It does work for the consumer. Even though it may not work in stocks and bonds and things like that where the Fed can interject and have the Invisible Hand working. But when it comes to people and to budgets and their income… I just think the consumer has lots of things to be concerned about, with energy going up, interest rates going up. Of course, health care costs are always uncontrolled… I don’t have a lot of hope for the consumer, notwithstanding the stock market going up all the time and a certain segment of the population making hay here. But the average guy is not doing that well.”

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To hear Eric's full thoughts and more, listen here:


Male: 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, September the 28th, the end of the month and the end of quarter number 3. And this is your weekly wrap-up. I'm your host, Craig Hemke. Joining us, as usual, this morning is Eric Sprott himself. Eric, good morning.

Eric: Hey Craig. Good to be with you. It's been a bit of a tough week here. There's been some interesting developments as you and I speak on the phone here today, but lots to chat about.

Craig: That is for certain my friend. And hey, we're going to try a little something different here today for people that don't wait to the weekend to listen to us. We've got kind of a special promotion from Sprott Money today. The iconic Canadian Gold Maple Leaf one ounce coin is available at a special price, just $39.95 over spot or C$51.95 over spot. Now, you can only take advantage of this exclusive price until 5:00 Eastern today. So that gives you like just a couple of hours. You can do this today by visiting sprottmoney.com or you can call 888-861-0775. Don't miss out. Prices of gold are actually a little lower than they were last week at this time. The reaction to the FOMC had something to do with that. But hey, Eric, silver's Kind of starting to show a little life and move back up this week. It gave something back after the FOMC, but here as we speak on Friday, it's picking backup even with the dollar rising. Maybe we're turning the corner, my friend.

Well, it's interesting you mentioned the dollar for starters because when the dollar was weak we didn't seem to get much reaction in gold, okay, we really didn't. And it was quite weak and of course, it's had a good week this week. And it's not so much I think that the dollar's had a great week, it's that the Euro has had a tough week because of the Italian situation. And, you know, the government...they're breaking the theoretical limits set by the EU, that the budget deficit is going to be above 2%, is going to be 2.3%. And so the Italian market tucked up pretty good shot there today. I think it was down 3.8%. The bonds went up a lot than...I think it was 38 basis points and of course it spilled over to the whole European system.

The DAX is down, I think about 200 points or so here. So it's been across the board and of course, futures are weak here. And of course gold, even though the dollar has gone up, the point I was going to make is that, you know, gold hasn't exactly crashed in. Yes, it was weak yesterday, but it's holding its own today. And silver's kind of surprising. And as you and I have discussed there offline, palladium seems to be hitting a new high. I'm not an expert on palladium. I don't study that market, but I find it intriguing that it would be hitting an all-time high here when of course to hit an all-time high, you have to have something going on in the physical demand-supply situation. The same could be true of both gold and silver, but particularly silver, because there's always a lot of gold around. Every ounce of gold ever mined is still sitting somewhere in the world but the silver gets consumed here. So it's very encouraging to see silver having that kind of move. I mean, it's almost a 1.5% move with the dollar being strong. So it's very counterintuitive here.

Craig: Perhaps we are reaching a bottom and yet you mentioned palladium. It's interesting. It's one of those metals that the LBMA manages through London and we all know how that system works. All those ESPs shines a light on what a fraud that is, but it is. It's a fractional reserve system. Palladium appears to be in very short supply and like you said, making new all-time highs. So maybe we can get some cracks in the LBMA system. You know it was an interesting week as well, Eric. Interest rates...you know, they're forecasted now to just rise, I think through the year 2030. I think everybody's expecting a strong economy now. It seems like everybody just thinks it's got to be endless at this point. I would imagine you probably don't see it that way.

Eric: Well, of course with rates going up, it affects the consumer. And we've already seen it in the housing and we see it in car sales. Those are very reliant on cheap financing. You can't keep raising rates 25 basis points every quarter and not think that the cost of buying a home has gone up significantly, which it has of course. And between that, and of course, now we've got the price of oil going up. We're at US$72. The low was what, $25 a year? It's way down there. It's gone up a lot. And of course, it filters through into the pump prices. And I saw a report earlier in the week that miles driven has now gone negative year over year, as has gasoline consumption now because, you know, people do react to those things. Thank God there is truly a market, you know...supply, demand and price and all that stuff that does work for the consumer, even though it may not work in stocks and bonds and things like that where the Fed can interject and have the invisible hand working. But when it comes to people and their budgets and their income, which grew like all the .3% this month, just announced this morning or August, I should say.

And sales were kind of modest. People were hoping they would have grown by .4%, they grew by .3%. So, I just think that the consumer has lots to be concerned about with energy going up, interest rates going up. Of course, healthcare costs are always uncontrolled. And all these policies cover less and less every day. I'm sure when the copays are higher and the initial deductions are higher, so I don't have a lot of hope for the consumer, notwithstanding the stock market going up all the time and a certain segment of the population, you know, making hay, yes. But the average guy is not doing that well.

Craig: Yeah. And you know, it seems so much the stock market in the US economy is based on confidence, consumer confidence, business confidence. But, it was a big week in the swamp of DC this week and that all continues and we're moving toward these midterm elections down here. How much do you think all of that could eventually spill over and slow the economy too?

Eric: Well, you know, I mean, I watched a lot of that show in Washington yesterday, the Kavanaugh hearings. The opposite polarity between the Democrats and Republicans is becoming quite extreme here. And, you know, we essentially got 50% people leaning one way, 50% leaning the other way. And they're so diametrically opposed to each other that it's a pretty explosive situation. And I don't know how...I mean, how do you get confidence listening to that sort of stuff going on. The mudslinging that goes on all the time and the obvious biases that each party has are just incredible. So, and who knows of what's going to happen in the election. I mean, sometimes I hear, "Well, the Dems...they're going to win." Then I hear that the Republicans are coming back. I don't honestly know. I don't spend as much time looking at as you might do, but it's going to be upsetting to somebody. I guarantee you. It'll be upsetting to somebody come November.

Craig: Yep. Well, Eric, I want to spend the rest of our time this morning getting caught up on a handful of mining shares that we've had a lot of fun discussing and following these last few months. Some have gone up, some have gone sideways, some have gone back down. It was a good week for companies like Royal Nickel. It was a bad week for companies like Garibaldi. And I thought if anything, I'd let you just kind of take over here and give us your thoughts.

Eric: Yeah. Well, I do want to talk about the stocks. And well, let me just start with Kirkland Lake because there's really nothing that I can add. I mean, the production looks okay. We saw the exploration results. I would say everything's in train. We'll get the production numbers for the quarter. I'm not sure whether they come out late next week or the week after. So that's all in line, I would say. In Novo's case, there was a presentation at the Denver Gold Show. There was no information in terms of grade or tonnage here, but it's really grade that we're all concerned about. And Quinton has explained that you know, getting these samples, you need a lot of samples in order to have a statistically significant result. I know they don't have those samples yet. It's been a very slow process. Incredibly slow process when I think of it. I mean, I think the last great announcement was in May or something. So we're almost six months later and it's been disappointing.

And of course, one of the things that Novo suffers by these days is, first of all, there's dearth of information, but you have other companies that are reporting great results that are in Australia, which I'll get to later and it kind of detracts because the money tends to flow to where the action is. But I do believe that there will be something forthcoming shortly from Novo and hopefully, that can set the records straight. We still believe in the precipitation thesis. They bought some marines [inaudible 00:10:06] sediments here up in the [inaudible 00:10:08] area which I think will be quite exciting. So, but it's been disappointing and I mean, you can't have a stock go up without good news. So that's, that's been a disappointment.

In the case of Garibaldi, they did announce eight holes. I described it to anyone who asked. It's a little underwhelming because the last hole last year was 8% nickel and 4% copper. And you know, our best hole might've been half of that. And we didn't get the width that we're hoping for. But there is a lot. Well, first of all, they have a deposit. We know that because there's lots of massive sulfides and they've realized that it could go quite a bit further than they thought. Thank goodness there's a nice cap. It's receding, a glacier that's receding and they can now a sample part of it and they suspect it goes in 1.3 kilometers further along. They hopefully will drill that quickly, but they haven't found the big source yet, the big intersection. So we have to stand by and wait for that, but all the signs, all the science says they should have a very major deposit.

I want to mention a new name that I haven't mentioned before, Walbich [SP] Mining. And I'm mentioning it because I'm an announced over 10% holder. I would encourage people to look at their presentation. They've had some spectacular drill results. It looks like they have a deposit that's shaping up pretty well here. They're going to have some initial production of a bulk sample that might produce a lot of revenue for them, quite frankly. So it's a company that they're in the Abitibi in Quebec. The number of structures keeps going up and the grade those structures is darn good. So it's something that people might want to take a look at. And by the way, I'm not giving investment advice. Now I want to close off with the RNC Minerals and they're the ones that have come up with these huge gold boulders in Australia.

And, they put out a release, I guess last week showing connectivity between what they call their level of 15 up to their level 14 where they said if it goes 180 meters of striking about 20 meters of vertical elevation which I think really opens things up here that you could have that kind of size in terms of the deposition of gold over such a big area. I always imagined that, you know, we had this sediment that caused gold to sort of puke out in a way, but it wouldn't be that extensive. But it sounds to me like it's much more extensive. They have these forest structures that go two kilometers along and below them all is this sediment which is causing the gold to spill out. So, you know, fingers crossed, it could be a very major discovery. Some people are even imagining it could be the discovery of the century for them to say, "Well, it's already got the biggest coal boulders ever, ever. I mean, it is very, very unusual."

So, and the sort of rumblings we get from the mine site is that they keep, you know, blasting and finding large amounts of gold. So, it's a very interesting thing. There's lots of great information. I would recommend that people go to the website, for example, ceo.ca. There's some wonderful posters there who do a great, great job of trying to keep people informed as to the progress down there. So, that's been very exciting for us. I think I first mentioned it might've been 20 cents. It went to $1.15 down at 80 cents now, but it sure looks like it could carry the day for us.

Craig: Eric,that was a great comprehensive update. You know, I don't know a lot of geological stuff and it's great to hear it. The one thing I'm pretty sure though, is puke out a geologic term?

Eric: I don't know, but I hope they keep puking. I mean, I couldn't believe the gold that those guys found in those nuggets. That was incredible.

Craig: Pretty remarkable stuff.

Eric: There's all these pictures on the website of these, you know, huge gobs of gold. And like it's very...and this is an incredibly unusual discovery, which I think that first boulder that had 2,600 ounces in it made the whole statement. And who's to say, you know, we got eight kilometers of strike for drill on here. So, it could be very interesting.

Craig: It's an interesting story. No doubt about it. All right, well before we wrap up, just remind everybody they've got one last chance to take a look at these Sprott Money online fall catalog. Hey, fall just started. Wait a second. Regardless, we have gold and silver bullion products, new Miss Maddox, as well as some of our classic customer favorites. There's something for everybody, so please visit sprottmoney.com for more details. Take a look at that online fall catalog. But again, anytime you're in the shopping for some bullion, maybe you need to store it, just give us a call: 888-861-0775. Eric, thank you for all your time and all that information and I hope you have a great weekend.

Eric: Well, it's looking better. We got silver up 2% today, which is highly unusual, so maybe something's happening here. I'm going down to Australia next week. I'm going to visit the Fosterville Gold Mine, I'm going to visit Beta Hunt and I get to visit Karratha. So we'll have lots to report two weeks hence.

Craig: Hey, I look forward to that. I'm sure everybody else will at the same time. So safe travels and from all of us here, it's "Sprott Money News." It's sprottmoney.com. Thank you for listening. We'll talk to you again next Friday.


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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.