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Weekly Wrap Up

Beware the Ides of March? What Stock Prices are Trying to Tell Us - Weekly Wrap-Up (March 15, 2019)

Head Shot of Eric Sprott Weekly Wrap Up

March 15, 2019

As we barrel towards the March FOMC meeting, the economic outlook continues to be lousy. Eric Sprott returns to break down all the gold and silver news you need to survive March Madness.

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

What the U.S. presidential race means for gold

Why you should be afraid right now

Plus: Eric answers your questions about the mining shares

“Lots of lousy economic data. But it’s just the COMEX, man… Luckily, today we’re back up a little. Maybe we’ll get some sanity back in the market. But it’s frustrating to have to sit by and watch it. And as I thought about what happens, here we have gold going down 1%. The stocks went down 3%! The stocks whose options are expiring today went down 3%. When you have an option, it’s that fine line between making money and not making money. That last 3% can wreak a little bit of havoc. It’s sickening that it happens. It’s just the commercial banks ripping off their customers again… for the sake of today’s profits.”

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Craig: Well, greetings, once again from "Sprott Money News" and It is Friday, March the 15th. The Ides of March 2019 and this is your "Weekly Wrap-Up." I'm your host, Craig Hemke and joining us today is Julius Caesar himself, Eric Sprott. Eric, good morning.

Eric: Good morning to you, Craig. Good morning.

Craig: Hey, Eric, before we get started, yeah, it's the Ides of March. Yes, but it's also basketball tournament time and March Madness is just around the corner. So, you got to be sure to check out the Sprott Money March Madness sale. Great prices on some of our best sellers. And Eric, you'll definitely want to beat the buzzer on this one. Call us at 888-861-0775 to check out all of the items that are on sale or of course, just visit Eric, we are kind of bouncing along here. We've recovered some from the beat down a couple of weeks ago. We're up a few dollars this week, a few pennies and silvers, so we're barelled toward the March FOMC meeting next week.

Craig: Well, it was a funny week and I was very, very upset with what happened yesterday with the price of gold going down at one time, $15, with really absolutely zero reasons for it. Lots of lousy economic data, but you know, it's just the COMEX, man. And you've got the quadruple witching coming up today. You got some options expiries in the metals coming up next week. And you know, when they decide to take them down, they just take them down. And I mean, luckily, today we're back up a little. We will get the sanity back in the market. But it's frustrating to have to sit by and watch it. And, you know, as I thought about what happens, here we have gold going down 1%, the stocks went down 3%. The stocks whose options are expiring today went down 3%. Well, you know, when you have an option, it's that fine line, right, between making money and not making money. That last 3% can wreak a little bit of havoc here.

And it's sickening that it happens and, you know, it's just the commercial banks ripping off their customers again, their buying customers for the sake of today's profits and that's very disappointing. But there are lots of great things going on. I mean, the fact that India came back into the market and bought six tons in January was good. And of course, we've seen other countries step up here. We have a pretty good total Central Bank buying in the month of January. We're seeing the Atlanta Fed has now their GDP number for this quarter, the March quarter, is now up 0.2%. So, we're right on the cusp of being negative, which I think again, supports the price of gold. So, there are lots of things that one could contemplate that would make gold interesting.

Some of the bigger things that I think about are, you know, the whole theory, we all want something for nothing, which is an impossibility because somebody's got to do the work. But you keep reading about these countries where, you know, there's more and more people on the dole and less and less people working and you know, it will lead to collapse. I was reading an article in "Zero Hedge" and it said something like, Denmark looks great, but it's collapsing. And I think, you know, they could put the United States in there too, and Canada for that matter, it ought to be part of them here. Because all these commitments that everyone has that we know, we know can't be financed. But yet here we have this populous feeling that we should all get something for nothing. I don't know where that all leads. Can you imagine if some of these candidates actually got elected? Where would the stock market be? Oh my God, it would be something else.

And, speaking of getting elected, I find it interesting just as a casual observer that, you know, every week there's a new Democratic candidate for president. And I'm putting myself in the mind of, you know, let's say the guy who came in as number 10 is, "Gee, those other 9 are all useless. I'm going to go." Then number 11 said that, "Oh, those 10 are all useless. I think I got a chance." And you know, I don't know what the number is now, but we're up to 15, 16, 19, whatever. And can you imagine the guy coming in 19th thinking the 18 guys in front of them are all useless? And he might be right.

Craig: He is right.

Eric: That's the worst part.

Craig: Yeah.

Eric: He might be right. That's the problem. Anyway, just food for thought.

Craig: I technically down here in the States unaffiliated. I have no party affiliation. I'm registered as, I guess, they call it independent, but I don't live very far from Iowa. So, I'm thinking about throwing my hat in the ring, Eric. And why the heck not?

Eric: Local hero.

Craig: Maybe I can't see.

Eric: That might be a better reason than the other guys.

Craig: There you go. Hey, I can get you on the list as a supporter then, I guess?

Eric: Absolutely.

Craig: And, we'll make up some yard signs and some bumper stickers, and off to the races we'll go. Anyway, back to the metals. We do have an interesting a week ahead of us with the FOMC coming up for March. You've mentioned that the Atlanta Fed now has the first quarter GDP pegged at just 0.2% growth, if you want to call it that. Even with the terrible data this morning that it might be on the verge of going negative that would be the first quarter of a recession if that's the case. The data has all been terrible. There's no inflation anywhere. The bond market is reacting to all of this. I don't know. What would you expect, just varying shades of dovishness out of Chairman Powell next week?

Eric: Oh, for sure. I mean, the fact that the central banks of the world have slipped, I mean, the ECB, whatever, the week and a half ago, said whenever, three or four weeks ago. And they just let, you know, the whole process of printing money and then pretending you're going to tighten, and then you find that when you go to tighten that the market crashes on you. So you have to flip. Of course, this is... Which is very constructive for gold, but think of what all this money printing is ultimately going to do here. And even as I think about the Atlanta Fed's 0.2%, if it wasn't for government spending, the monies that they don't have, where would we be? You know, it'd be negative. So, to think that they can hold it together by printing money is just almost so unrealistic and that's why we should fear for where the economy's going. We should fear for asset values and therefore, you want to have your money where it can hold its own.

And the funny part about holding its own, I remember getting in the gold in 2000, I just got to hold on here, I can see what's going to happen to this NASDAQ market. And lo and behold, the stocks went up 1,700%, the gold stocks. And now we're seeing we're in a bull market in gold stocks here. And I think there could be lots to go, particularly if you can imagine some of the prices that we might have for these products. Look at what Palladium's done. It's tripled. Wow. Can you imagine even talking about the price of gold tripling from, let's say, the low of call that 1,100 going to 3,300, what the stocks might be worth? Wow. Maybe 1,700% will look like a joke. So, anyway, and this can all happen. It can all happen in the world we're sitting in right now.

Craig: And it has happened before. I mean, I suppose there's quite a few people around us listening that remember what it was like in 1979 and 1980. My friend Ned Naylor-Leyland, once put out a list of all of these stocks that went from, you know, 65 cents to $65.

Eric: Oh, my God, yeah. Oh, yeah. Yeah, yeah. Well, you know, when the Nixon closed the window, I mean, the price of gold was $35. It went to $800. Like, wow. Anyway, it's amazing what could happen here. And, you know, I'm seeing signs of activity in some stocks, where the activity is suggesting they're moving because of a high gold price. And what I mean by that is, stocks where the ore body is uneconomic or the margins are thin, either one, ore body on the economic margin is thin, well, you know, with a higher gold price, the uneconomic ore body becomes economic, and the margins that were thin become large. And you can get these dramatic moves in stocks, which is what you're referring to back in the '70s when the prices went from $35 to $800. Suddenly, somebody had a, you know, pig in a poke that all of a sudden was worth a lot of money because of the price of gold going up.

Craig: Exactly. And I've noticed that too. I even noticed that in the trend, if you watch the GDX or the HUI index, even though gold and silver have rolled over and corrected these last few weeks, there's this still solid trend in those indices. It goes back to August or September of last year. That would lead me to think that there's still a lot of money that expects prices of the metals to continue higher this year. Does that kind of tell you the same thing?

Eric: Well, it looks that way. And because these particular stocks, I'm not going to mention the names, but I'll mention one name, is perhaps Novo, where up to now, we think there is a low-grade deposit. We think there's a low-grade deposit. But a $3,000 gold? Oh my God, that low-grade deposit over 10,000 square kilometers? What can happen here, you know?

Craig: Yeah.

Eric: And even while I'm on it though, it's been very hot recently. And I was reading an article on the ore sorting and they come up with new techniques of ore sorting, which of course, can make the margins on gold mining considerably more. Imagine if you started in the pit and you only need the process, half the material you use to process. Well, now you don't have to move it. You don't have to put whatever on it, or grind it, or whatever. And all of a sudden, your margins go crazy. And this particular article on ore sorting specifically referred to the Karratha, a property of Novo that obviously, they're doing this in-lab testing and I don't think we really have the results. But the guy from the lab said, "Oh, it looks like it has made a very major difference." Well, you know, it's that same thing. Your thin margins all of a sudden become serious margins and the stocks can go a long way. So, I'll just point that out as an example.

Craig: You bet. And Eric, actually, every week we invite people to send us questions and, occasionally we get a few that get passed along. And we actually had a couple of questions this week about a couple of specific small cap miners that we've discussed in the past, just people looking for updates. One person wrote in wanting to know what you thought currently about Garibaldi and another person looking for any updates you might have on Royal Nickel.

Eric: Sure. Well, Garibaldi, you know, they're looking for nickel, cobalt, which are two metals that are kind of moving up in price these days. They haven't really issued a lot of results. And the results had been... What's the word I would want to use? Not as impressive as we might have hoped for. Okay. Not as impressive as we might have hope for. I'm still a big holder, I've never sold a share. But I think they're vectoring... Well, the fact that they have nickel, cobalt right there, I mean, and they've had some very, very high-grade sections there, but just not wide enough to make for a large ore body yet. But to get a thin high-grade section, it's got to come from somewhere. And it's the from somewhere part that they're trying to vector in on. And they haven't done it yet. But it's likely that they will and it's a big, big property. So, I'm still hopeful that things will work out. It has been a disappointment, but that's the nature of exploration, and timing, and you know, the timing hasn't exactly worked for us yet. What was the other stock?

Craig: Royal Nickel.

Eric: Oh, Royal Nickel. Yeah. Well, I like Royal Nickel. I like the potential for the deposit. I haven't liked the quality of the news releases to be brutally honest and I think I've expressed that to them. There's always been room for more information so we actually understand exactly where we're going here. I still have very large hopes that this ore body, which has some tremendous high grades, will prove to be an unusual ore body. The drilling has been, in my mind, very successful. They keep finding high-grade sections. And one of the things I've found with high-grade is typically the analysts' cut, what's called a high-grade, so if you get 1000 grams, they cut it to 50. Well, if it's really 1000 grams and you spread it over the other holes, man, does it ever make a difference to the ore body? And we saw that at Fosterville, where they didn't need to cut it. Okay.

And I'm kind of hoping in the case of Royal Nickel that you don't need to cut it, which would make for a much more robust grade than what we're looking at. And we still need more drill results and we need to prove continuity of the pyrite section underneath the structures. But I think that will be forthcoming. And I personally own a lot of it. And other than being a little upset with the way news is given out, one nice thing about ore bodies, they don't know who's running the company. And normally, the ore body works out.

Craig: Regardless of human interaction with it.

Eric: Right. It should be good. Craig, I should mention a few other stocks actually. Amex Exploration brought out some very fancy, spiffy drill results and they announced it. They had a visual of gold in some of the other holdings, in three other holdings, and if anything, so we're standing by on that one. I did get involved with a company called Goldsource. And this fits in with sort of the possibility of the price of gold rising a lot. The company in British Guiana, with a low-grade ore body, who subsequently found what looks like a bit of a higher-grade ore body, but it's only 3 grams. But in the right price environment, things can happen there.

And, just one more comment on Wallbridge, they brought out some drill results from their other, I'm going to call it their other potential property called Beschefer. They were sort of uninspiring, but still decent. But not that anyone cares. We're all in it for the same one property. So, I continue to like the stock here. And it all looks good on the gold front. I mean, there's more and more reasons every day to think that we're going to find salvation in gold here. So, I look forward to next week.

Craig: Oh, that's terrific. All right, well, hey, one last thing before we go. We want to give a shout out to the newest member of the Sprott Money team. His name is Chris Gibson. And he has the official title of vice president of sales. And he was recently featured in a Globe and Mail article that focused on renewed optimism in gold. You can check out the article in The Globe Wealth section or, hey, actually you can just call Chris directly if you want to discuss the precious metals with him. Yeah, here's his number, 416-492-0518. He puts that right out there and happy to help anybody and answer any questions about where he thinks the whole entire precious metals universe is headed. Eric, I'll be curious to see where the precious metals universe heads next week. It's going to be a consequential week with the FOMC, and I look forward to talking to you again next Friday.

Eric: I will look forward to that too. All the best, Craig.

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