Weekly Wrap Up

“Paradigm Shift.” – What a week for precious metals. Weekly Wrap-Up (July 19, 2019)

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July 19, 2019

This week marks the end of a tremendous week for precious metals, particularly silver. The banks continue to short precious metals in an attempt to hold back prices, but clearly, the bull is loose! Many of you are asking Eric what to buy? Eric tries to answer this question and more in this edition of the Weekly Wrap-Up:

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Male speaker: 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, July the 19th, 2019. This is your Weekly Wrap-Up. I'm your host, Craig Hemke, and joining us as usual on a Friday morning is Eric Sprott himself. Eric, good morning.

Eric: Hey, Craig, good morning. What a wild, wonderful, wonderful, wonderful week we had, and I'm sure we'll have lots of interesting things to chat about.

Craig: No doubt about that my friend. Hey, every week it seems like here in the summertime I lead off telling everybody about either the deals page at Sprott Money or the Sprott super summer sale, which ends in like 12 days. So people need to take advantage of this and they should have taken advantage of it last week, Eric, because silver now is over a dollar higher than it was last Friday. So, there's still time though. The Sprott super summer sale goes on until July 31st. You go to sprottmoney.com and check us out, or you can call us up at (888) 861-0775. Eric, over a dollar in silver, 27 more dollars in gold, making new highs going all the way back to May of 2013. How do you feel here on Friday, the 19th of July?

Eric: Well, it's a very exciting, as I kind of warned on the broadcast last week, I warned our listeners that I might buy all the silver that Sprott money had in inventory. Well, you know, I bought the equivalent what they had in inventory but I did buy it through a different physical route. Put in about 10 million into silver in the week. Obviously silver wants to go here. The set up on the CME is incredible. I mean, people are short...the bankers are short almost 1.2 billion ounces of silver. And you know what? The world wants to own silver. And I used the analogy, I think it was last week, that the bank from, was it in Hungary or Poland? That bought a hundred times of gold, had put their money in silver, there'd be no silver. And it's just, the reason I said, it's so easy, you know, what's $15 billion in this day and age to clean out all the inventory? So we got a wonderful setup with all the shorts in silver. We got a wonderful setup with all the shorts in gold. They continue to sell these two metals short to try to limit the rise in the price. And yet we see physical volumes pouring into the ETS. You just mentioned to me off phone here that 11 tons came into the GLD yesterday.

Well, you know, you can't do 11 tons for 250 trading days a year, you'd be buying every ounce of gold ever produced. And it's not just the GLD I mean there's ETFs over in Europe that are hot too, and in Asia. So, I mean, this is a worldwide thing. We all kind of know that more and more experts are going to the reasoning behind golds move. The latest person is Ray Dalio who said, "It's so obvious that we're going to go to negative interest rates here." What are you going to own? We're going to have a paradigm shift. That's an important word. We're going to have a paradigm shift where what worked before doesn't work and new things will work. And the new thing that he pointed out was a gold trade. And, you know, people suggest, well we have 10% of your money in gold. Well, you know what? Gold and gold and shares represent about one half of 1% of people's portfolios. And how do you get to 10? I mean, it's impossible. Like, you know, it's almost like the price has to go up 20 times to get to 10% and we seem to be on that kind of a drive way where we have this huge breakout. The gentleman who kind of tipped me off to things at the end of May when he said, you know, "It's going to 1450 in five to seven weeks." And it almost did exactly that. It went to 1443. He's now coming out and suggesting a target of 1750. Now, I want our listeners to know, if gold goes to 1750, there will be substantial, outer worldly amounts of money made in the equity shares in the precious metal business. The UE index is already up almost 50% from the end of May.

Craig: Yeah, two months.

Eric: From the low. I mean, it's incredible. Okay. And we've just started. So, it kind of looks good and I really want us focusing on silver, because some of the silver targets that I see out there are substantive. And let's just...They're twice as big as I'm going to mention, but let's just say 50, okay? Let's say silver goes to 50. Well now, the average guys costs might be 15 and 20. Let's just say 20. So fine, now he's making $30, you just figure out how many ounces of silver that guy's going to make, multiply by 30, tax it and that's what he's going to earn. And then tell me how cheap a multiple it is. And you realize what can happen to some stocks. And, you know, the silver stocks have gone crazy this week, I don't even know what percent they've gone up. I've had stocks this week that have gone up 50%. There's so much more to happen there. We've just started on silver. I mean, it's going to be very exciting going forward here. And I've been very active in the silver space this week and last week. A couple of them have been announced, one was announced yesterday about some discovery metals. There's other ones I'm working on that there's probably something happening, but it's not, it hasn't been completed yet. And I'm making a transition from let's say high-quality gold stocks to lesser-known silver and gold names and particularly gold names where the leverage is incredible.

Craig: Eric, how far...It's hard to speak in generalities, but, ,some of the exploration companies are still kinda, you know, they're just kind of going sideways, you know, the stuff down in the Pilbara hasn't really bounced back yet. In general, what kind of market participation, what kind of price rise do you think, you know, really sets off a scramble where people are just looking for anything?

Eirc: Not going to be far from here. I mean, we're testing the recovery highs we had here, okay? And in fact, we might've gone through them yesterday. I haven't even had, not in my office or even had the chance to check the exact, you know, whether we are $2 high. I think we had a record closing high for this year. But it's not going to take much more. I mean, if people see gold going to 1500, when you look at the bottom is at 1050, we're at 1500. We're in a bull market. We're in a bull market in the equities, you know when stocks go up 20% it's a bull market. UE Index is up 50. And I am looking for small cap names. I'll give you an example of a name, I won't mention the name, but the stock was trading at 350 in 2011, which was a high for the price of gold, and also the high in Canadian dollars it's a Canadian company, and the Canadian dollar price of gold was at the high was 1880. And the price today is 1880 and this company is trading at 117th of it's high, 117th of it's high. And they were involved in a major discovery. Like these things can go like scholarly cats. We had a company in Canada called GT Gold, came up with a beautiful vault up in the Golden Triangle, and that stock is up 100% now. I mean, it's going to happen in a hurry here. So you got to be looking real hard. You got to take risks. You got to make the assumption that big things are happening and how do I participate in this? Can I buy silver in the ground for 10 cents? Can I buy gold in the ground for like $25? That sort of thing. You know. Because anybody who's got any gold in the ground, when gold gets to some of these targets like 2000 every ounce anybody has in the ground would be economic. So, that's what I've been spending a lot of my time doing here in these last few weeks.

Craig: Yeah, no, it's an exciting time and what's fun is you and I have been talking about this, really all year, that this was going to be a big year. You know, that the central banks were going to be reversing policy, and that nobody was anticipating and expecting that. And when you talk about the amount of global assets that are not in gold, not in gold. I'll give you another stat, Eric. Just this week, it was announced the Chinese were liquidating some treasuries again. It was very small amount relative to what they total have. It was like $3 billion worth. But, if they were to take just that little tiny little bit of money, they have over a trillion dollars in treasuries. If you took that little tiny bit of money, it's like 65 metric tons of gold. I mean, there's so much fiat cash and so little gold

Eric: And maybe if gold starts moving up fast, people are going to go to silver too, right? Silver hasn't even had a move yet relatively. I mean who's kidding who? And the data we're seeing on physical silver removal and the short position, the comics are just screaming at you. But, man, this thing should really get going here in a big hurry.

Craig: I know, Eric, there's a whole list of questions from folks that have sent in this week. And again, I want to really appreciate all the questions that get sent in from all of our listeners, and we just have...our time is limited each week normally, and so we can't get to all of them, and we'll try to get to most of these today. But, Eric, before we go there, I know there are a couple of equities you wanted to discuss directly. Tudor maybe, and ORNX, a little Walbridge. Why don't you hit us with what you're looking at there?

Eric: Sure. Well, it was announced and I made a further private investment in the Tudor, at 45 cents a share by the way. The stock closed yesterday at 39 I believe in Canada. It's in the Golden Triangle. It's drilling a monster play, just like the GT Gold play. The last hole they announced, which was last year, was 563 meters of 1.08 gold. It's in the perfect logistical place to develop it. The market cap of the company is like 150 million I think. And yet what we're shooting for is to find that 10 or 20 million ounce discovery. So you're paying nothing for this discovery. So, that's the sort of play that I like where, man, if the price of gold goes to, you know, 1700 or 2000, these plays will look so economically viable and the stock will go up so much. And the analogy, I use the Seabridge back in 2000, I remember buying it at a dollar and their theory was like, well, we're going to buy all buddies and we're working $400, price was 250. Well, of course, the price goes to 1900 and Seabridge went from a dollar to $35. That is what we're looking for. A dollar to $35 set you up for life.

Craig: Yeah.

Eric: That's what it's all about.

Craig: How about a-

Eric: Oh, I should mentioned. I should mention. RNC had announced that Mark Selby was leaving the company. I don't know the reasoning for it. I presume I might hear something about that this week. It was just announced over late last night. It was a little critical of Mark for, you know, putting the company back into a debt position by buying the mill in Australia. Paul Huet will be taking over. He's a veteran mining guy, so, a gold mining guy, which Mark was not a gold mining guy. So, hopefully, the stock's been very quiet here, relative to everything else of course. So hopefully this can restart that. In the case of Walbridge, a company called Balmoral basically owns all the land around them. Announced that, "Oh, we're going to drill just on the border of where Walbridge's drilling. Because we see this formation going on to our property." And that's interesting in the sense that if it does go on to their property, it sort of confirms that, okay, we might have a two and a half kilometer long property here. Now, you know, you start putting two and a half kilometers and you get depths of 600 meters, you get widths of who knows what the widths are, but, man, you could get some big, big resources here very, very quickly. So, we'll stand by in that one. In terms of, I know there were some questions about the golden triangle.

Craig: Yeah, that was one of the questions.

Eric: Northwestern BC. And I'm in a company called Garibaldi. We used to talk about it. I know that they're drilling, hoping that they'll have some results posted here soon. The stock's telling you that they've been successful in the drilling there, and the whole area, you're just elephant hunting in the golden triangle as that's where the GTT gold's announcement was earlier this week, the stock through the bottom percent this year. That's where Tudor is. That's where Seabridge is. That's where Pretium is. S. K Creek was there. So it's a wonderful area to make major discoveries.

Craig: I also had a couple of questions this week, Eric, about some of the streaming companies. Mavericks, Metalla Royalty. Do you ever invest in streaming companies? What do you think about those?

Eric: Well, I haven't. And I'm not so sure that, that is not where I'd put my money today because, you know, for those guys, because their cost of the ore is so low, they're a little bit like crooked in that way where, you know, your cost of production is essentially let's say in the $400, the advanced against the gold purchase. So you're already making 1000 bucks and 1400, you know. When it goes to 1600, you're making that extra 20%. Well, there's lots of mining companies whose costs are at $1,200 but it goes to 1600. They double their earnings. That's the sort of company I'm more interested in owning. So, I haven't, and they've been great plays for sure. And I think they're very interesting. They're very interesting. But they're not situations that I follow very closely.

Craig: You've been talking for a couple of weeks about silver companies and trying to find silver companies that you can invest in. Well, here comes everybody with some suggestions for you. Let me just lay a couple on you and tell me if any of these four are anything that you know about, Levon or Levon, Excellon, a compay called Excellon, Silver One, or Alexco.

Eric: Okay. Well, Levon, I just bought 20% of discovery metals, which is buying Levon. So, that's the answer to that one. That was this week, okay? Excellon, which is gone up a hundred percent now in about a month and a half. I think I own 27% of that. I haven't bought any recently, but then I'm well positioned. I probably actually restricted from buying it because I'm over 20. So, it's a good investment. It's doesn't have the leverage of some of the other ones because they're such a high-grade silver producer that it wouldn't have the kind of upside that, for example, Levon might. We had Alexco. I'm visiting with Alexco this coming week. They're coming to my office. I'm an owner. Good silver play, high grade, so, not quite the leverage of a low grade. Levon's low grade for example, would have way more leverage than Alexco in a high price silver environment. I put a high price here. Not, you know, go to 50 or 100 dollars or something like that. What was the fourth one you mentioned?

Craig: Silver One.

Eric: Oh, Silver One. Okay. Well, Silver One, I believe I just purchased about 18% of that company. I think that's in the public domain. I sure hope it is. They did an issue that I was a big participant in about three weeks ago. So, you know, it's interesting, two of those four names I recently purchased. So, in recommending that people buy silver stocks, they got to try to get in front of me. Because I'm all in. And I'm looking every day now and there's something that's got some action going. I'm trying to find it early.

Craig: Yeah. Eric, let's close with this question. Because I think this is...This is a good question for a lot of listeners, I suppose, that listen to us every week and are getting excited about the space, and they see what's going on in the world. But, you know, they don't consider themselves to be, you know, hedge fund managers, or high net worth, or anything like that. This one came in and said, look, "I'm just a small time buyer of precious metals on occasion. Do you have any advice for us ordinary folks?" He says, "Who are likely getting older, want to protect our savings rather than leave it in the bank where it didn't earn any interest and prefer the safety of owning their investments." Well, this guy, he says he listens to our talks every week, but he's not a big time buyer. What do you tell somebody like that?

Eric: Well, of course, I'm an aggressive purchaser and I'm an aggressive investor.

Graig: Yes you are.

Eric: And I kind of preach that everything's about risk-reward. And if you won't take any risk, you won't get a reward. And when I'm looking at precious metal stocks, I normally talk about the reward, and the rewards here that we are potentially looking at, which are measurable. And if you're an investor, you can measure one of two ways. One, okay, what's the guy theoretically got in the ground? Okay? And what's the market price of that? You divide the number of ounces into the market cap, and okay, it's got to be $10 an ounce. Now, just do a calculation. Imagine that the price of gold goes up 300. Do you think the $10 in an ounce is an appropriate valuation if the price of gold just went up by 300? What do you think? Maybe that might go to $100 in the ground. Okay. It goes 100 you made 10 times of your money. Or if he's a producer, calculate the extra profit there. Everybody tells you what their cost of producing is. You know, they're [inaudible 00:19:14] it's let's say 1100 so at 1300 he's making $200 at 1500 he's making $400. His earnings double, has the stock doubled? If the stock has doubled, giddy up go. And what if gold goes to 2000, now the guy's making $900 in it. Well, you know, if the stocks going to go up by three or 400% so, you know, people can either choose to believe that we have a new paradigm as Ray Dalio talked about or don't believe it. Make up your mind. Do we have a new paradigm or don't we have a new paradigm? If we have a new paradigm, big, big, big things. It's already happened, are going to continue to happen in the precious metal space.

Craig: Yup. And I had also encouraged those folks who listen to us every single week, wouldn't you? We're going to keep talking about this stuff every week. That's for sure.

Eric: Well, it's very exciting. A lot of things have moved now, so it's getting less and less opportunistic because it's more obvious, right? It's more obvious that gold's in a bull market. It's not obvious that silver is in a bull market, but it sure feels like it's going to be in a bull market. So, there's still opportunity. I think there's probably more opportunity in silver than there's in gold. But that could, I mean, we could be sitting here next week and silver is at 1750 or something and then a confirmed bull market. Well, you know, people don't wait around. You got to make your move when the time is right.

Craig: Yeah. I'll tell you the burst in price this week in silver had all the kind of the trappings of that initial surge of big money coming in that you'll look back on it now, you know, 6, 12 months from now and go, "Yup, yup. That was the point. We've seen it before."

Eric: And the interesting thing about it, both in silver and gold is that the commercials they were short and have shorted into this round, big time. They still haven't covered. In other words, we don't have any influence of them having to cover those shorts. And, you know, maybe they won't. Maybe they can engineer some takedown again. So, for example, you know, maybe they'll get the CNA to increase margins on silver and gold and hopefully they can try to shake people out. That's what happened in, I think it's 2011 or '13. It was so orchestrated. I mean, it was just a joke. Because, you know, we can't have the banks losing money here even though they've proved it really over and over again. But they've got people trying to protect them. So there's always that risk that somehow the exchange is trying to rig the price going down. But there's so much physical buying in the world. We could have a real sniff that there's a fiscal problem and we know we got them. And who knows where that price is going?

Craig: Exactly.

Eric: It should be way beyond anything you and I been talking about.

Craig: Yeah. And you start getting that, instead of a 0.5% global allocation, you get a 1.5% or a 2.5% that just simply overwhelms what the banks are trying to do too.

Eric: Yes. Good luck. Right.

Craig: Exactly.

Eric: Well, again, we're going to keep having these talks every Friday. Encourage everybody to listen, especially such an exciting time. And there is obviously no time like the present to visit sprottmoney.com where you can buy metal there. You can store metal with us at any of our six locations around the world. It is just a fabulous time to be getting involved in the precious metals. So please visit sprottmoney.com or call us (888) 861-0775. We'll even tell you how to own it in your IRA. Give us a call any time. Eric, I will give you a call again next week and I look forward to speaking with you then

Eric: I will look forward to that. I can leave everyone with two words. Paradigm shift.

Craig: I like it. I like it. All right, my friend, have a great weekend.

Eric: You too, 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.

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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.