Weekly Wrap Up

“Incredible Dysfunction.” What The U.S. Shutdown Means For Gold And Silver - Weekly Wrap-Up (Jan 18, 2019)

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January 18, 2019

In a week where gold went “nowhere fast”, all indications still point to a strong year ahead. Eric Sprott is back to break down all the gold and silver news you need to keep your eye on the long-term ball.

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

  • The report that “took the starch out of” gold and silver
  • The good sign from Goldman Sachs
  • Plus: why 2019 could be 2011 all over again

“So far, gold’s hanging right in there… Fingers crossed, I think we’re still in good shape here. I love the fact the Chinese are buying, the Russians are buying, the Turkish Central Bank’s buying. There are so many different entrants in this market. And ETFs have been pretty firm too, so I think the outlook is improving by the day.”

Ask Eric a question by following us on Twitter (www.twitter.com/SprottMoney) or Facebook (www.facebook.com/SprottMoney) and post to us using the hashtag #AskEricSprott

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Man: You're listening to the Weekly Wrap-Up on Sprott Money News.

Craig: Well, hello again from Sprott Money News and sprottmoney.com. It's Friday, January the 18th and this is your Weekly Wrap-Up. I'm your host, Craig Hemke and joining us, of course, this morning is Eric Sprott himself, Eric. Good morning.

Eric: Hey Craig, how are we doing?

Craig: We're having a just a fun week, aren't we Eric?

Eric: Yeah, yeah, going nowhere fast, right?

Craig: Yeah. After all what seemed like we were off for a hot start. A couple of weeks ago, that economic report, the employment report, two Fridays ago, kind of set us back. But that is not going to slow us down, and I want to point everybody before we get started, to the Sprott Money Signature Sale. It is on at sprottmoney.com. We've got all kinds of great deals on random year coins and many other products. So, go to sprottmoney.com and click the deals tab. That's always a good idea, there's always great deals on the deals tab, just find that right there at the navigation bar, its sprottmoney.com. Of course, you just give us a call 888-861-0775. All right. So yeah. Eric, what did this employment report do to us two weeks ago? Because it certainly, seemed to take the starch out of gold and silver.

Eric: Yeah, well, actually, yes. You know, I'm not a great believer in employment reports. And I don't know whether, with some feature of that month that kind of made a go up, I'm not absolutely certain, that they have so many different adjustments they put in it. I mean, I can I believe this an economic recovery going on now. No, I can't believe it, you know, do I see what's next Netflix announced? Do I see what the various retailers are now, seeing here, it's not robust. Okay. There's all sorts of problems out there. And I think with the shutdown and the trade war, and the whole European thing, which I think might be more of a disaster than what we have.

Because how they're going to keep that together, I don't know. And I might find out that the issue even though they said they were going to start printing, I gather from the latest data, they didn't start printing. So that's one of the things that help us market, central banks have been in the market for the first couple of weeks. And, you know, it's probably one of those things that even though we said we weren't going to do it, we do it if we need to. So I think they help the market here and then, you know when people clue into it, it's not going to last.

Craig: Well. And Eric, let me hit you with this. Since that employment report, since the first of the year, the banks that make the market on the COMEX have increased the float. They've diluted the amount of available contracts, by more than 10%, or they've added 60,000 new gold contracts to the float of available contracts. This is the first of the year. That's 200 metric tons of digital metal they've created from thin air. Eric, as a chairman of Kirkland Lake, what would happen to Kirkland Lake Stock, if you diluted the float by 10% in a couple of weeks?

Eric: I got it. Well, of course, anytime gold goes up, it lifts all boats and personally, the sector could use some boats. And so far as you point out, the goal is hanging right in there, it's low 1290s, it would have a little bit of a sell out, but it would always seem to come back, 'cuz it might come back again today. So you know, fingers crossed, I think we're still in good shape here. I love the fact that the Chinese are buying, the Russians are buying, the Turkish Central Bank's buying. There's so many different entrance in this market and ETFs have been pretty firm too. So I think the outlook is improving by the day.

Craig: You know, another interesting factor, though it might be a contrarian factor or even Goldman Sachs come in on the side of a target for price this year of something like $1400. Is that good sign to have Goldman on our side or a bad one?

Eric: That's a very good question, I'll tell you why it's a good question. I saw that Goldman this week, came out and said, you know, the economy might not do too well because of these losses in the stock market when people get their monthly statement. Okay, so I want that to resonate with people. When people get their monthly statement from Goldman, they're not going to like it or Merrill or whoever else, okay. But we just saw set a quarterly earnings, when these guys made gargantuan amounts of money.

Which sort of begs the question, well, how do you guys make money and your clients don't make money? But they're all you know, having a very tough time when you're sitting there recording almost record profits and I think we know the answer. I think the answer is that they go against the clients. So they love this volatility, you know, when it's going down, you're making money, when it's going up, you're making money. And who are they making the money off of? Well, I mean it's very very straightforward answer, their clients. And that we're worried about their clients, they are making too much money. So, I just...I'm so disappointed in the whole banking business and what they do in the stock market and you always hope that you know, someday this is all going to end here. So, we'll see.

Craig: Eric just one last topic this morning and I want to get your thoughts on this, we're watching just incredible dysfunction in Washington DC. It's just getting worse by the day, it's remarkable to behold. The government shutdown is stretching now towards a month. The next debt ceiling debate will be coming up at some point soon. I mean all of this stuff, it sure looks a lot like 2011 when S&P had you know, they cut the U.S's credit rating. You know, all of that back then combined for to make a pretty good environment for gold. Can you see that coming again this year?

Eric: Absolutely, I mean, the debt problem is so large, in fact there's an article on Zero Hedge, I didn't have time to read it today, talking about the...the underfunding of the pension plan. I thought I read a number that it's like $50 trillion already, and it's more than just a pension that's underfunded right, it's all the health care costs and so on, benefits fleurs, military and so on. So we just get worse and worse by the day, and there will never be a change in that. Okay, unless there's some kind of see change in the way people in government function. And I don't see it, they're just going to try this straight to the wall someday. And they'll have to, you know, people are going to give up on the paper currencies and they going to have to find some alternative. I'm pretty sure you and I know what that alternative is going to be.

Craig: Let's hope so. And actually, one last topic I want to make sure I asked you because I'm sure this is a lot a lot of folks' minds. What did you make of that merger that was announced this week between Newmont and Goldcorp?

Eric: Yeah, you know, it's funny, I mean, we have to look at all these things as Kirkland Lake. And I always say what we're going to do is something unless we steal something. Which I thought we stole and we bought St Andrews, I thought we stole when we bought SP. It doesn't bother me you know, it's not as I'm sitting there, oh my God, we missed a great opportunity, I don't think we did miss a great opportunity. I wonder what's in it for them, are they firing people? You know cutting down overhead, which is not good for anybody for that matter.

So I...it doesn't, it's a non-plus for me and I should say now that you mentioned Kirkland Lake, that I had been reporting as a solid this weekend. Of course, on some of the chatline people are, what's Ron doing selling, I should remind those people, I own 22 million shares,okay. And I haven't sold a share in a long time other than a charitable donation I made late last fall, and some tuning between one kind of account another kind of account. And there's lots of interesting opportunities out there that I care about. That is something that presents itself, I want to be prepared if Kirkland is not prepared. So don't...we got things well under control here, I know my selling's not going to make it anywhere this is going.

Craig: Do you think it matters much institutionally? Does it got you make...help sector get more attention? Or is that kind of a non-event too?

Eric: You're talking about the mergers now? Bringing more people interested in...

Craig: Yeah, exactly.

Eric: I think that brings them in for sure how, in fact, one of the outcomes of this merger is that Goldcorp will be the delisted of course from Toronto. And that'll leave Kirkland Lake as the largest Canadian gold company. So I think we get a very good shot at getting into the major index in Toronto, which would be quite positive for purchasing in the future.

Craig: Yeah, yeah. Very cool. All right, my friend. Hey, thank you for your time. I very much appreciate it. And I wish you a Happy Friday. A fun weekend. I look forward to talking to you next week.

Eric: Okay, Craig, great. All the best today.

Craig: Hey, It's time for us to head out but before we go, make sure you look again at sprottmoney.com, and as you look ahead to 2019 check out all of our 2019 products. sprottmoney.com is where you want to go and of course, you can always call us 888-861-0775. Again, thank you for listening. We will talk to you 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.

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