“I’ll tell you what I think is probably going on. When we look at the bank earnings, they say, well we need volatility in markets to make money. And you need to read through that. Well, why would you need volatility? Because we’re going to get you one way or the other, OK? And if we can get something to go up, great. If we can get something to go down, great. And would I imagine that the banks are on the other side of the trade? Yes, I would. And do they have the money to pull it off? Yes, they do… If you’ve got unlimited pockets, you can make things do whatever you want over a very short term basis.” - Source, Sprott Money
“It’s bad enough being down to 1216 or 1217, wherever we’re trading right now. But it’s the process we’re going through. As you know, I’ve expressed many times before that whenever the commercial banks say, ‘We need volatility in markets,’ well… they’re getting it! And of course they orchestrate it, I believe. And that’s exactly what we’re going through, with not only gold and silver. We see it in the oil market, where it got up to 77 and everyone gets excited, it’s going to break out, and bang! It’s down ten bucks three weeks later… So, here we are. Who knows when we get off of it.” - Source, Sprott Money
President of US Sprott Holdings Rick Rule expects commodity stocks to play “catch up." Many mergers and acquisitions in the mining business are coming, Rule predicts.
Rule says gold and silver have been weak largely because their denominated in the strengthening Dollar.
But the Dollar strength has a good deal to do with the weakness of competing currencies and economies rather than actual strength of the U.S. economy.
However, long term, Rule is optimistic regarding the U.S. economy.
“Between you and I and the listeners: As you know, what goes on in our world seems to have nothing to do with the real world, anyway, and a lot to do with what various traders illegally want to do on COMEX. And obviously they’ve had their way with us here. But it looks like they’ve cleaned everyone’s clock for the last six or eight weeks, and we’re ready to go back up… It looks like we’re in a bottoming process here.” - Source
Gold demand is picking up .. If you want to protect yourself from the vulnerabilities of currencies you have to own gold. Eric joins us from Dublin to discuss the following:
The Global demand for physical gold.
The Impending Trade Wars.
A WWU’s listener’s question on pricing structure of physical metal
Eric discusses the recent gains in gold and silver. In 2016 stocks went up 160% in six months, we could be looking for something similar in the gold sector. It’s a tiny part of the overall market that could explode quickly.
The dollar index had support at the 93 level, but it seems to have broken to the downside. If you look logically at the U.S. financial situation, you will realize that they are bankrupt.
There will be a shocking wake-up call at some point when people realize things are unsustainable and pensions can’t be paid out. There is a lot of chaos happening in politics in Washington, and it doesn’t seem like much will be accomplished.
Foreign countries are going to continue selling U.S. dollar treasuries. It’s not ridiculous to think that gold can’t go many multiples higher. The way the system has evolved is a good reason to hold gold for the next decade.
Eric discusses the ICO frenzy in cryptocurrencies and why he feels that there are too many different versions of cryptos. He prefers gold and silver but thinks cryptocurrencies may have a place especially if they find a way to tie themselves to gold and silver. He expects the market to move similar to 2001 he expects it to be volatile.
He says “I am a huge believer that metals are manipulated by central authorities when they lose control we could be looking at a sustained gigantic bull market in precious metals.”
Another week behind us, and Eric Sprott returns from the field to help us interpret it. In this edition of the wrap-up, you'll hear:
The macro fundamentals moving people towards gold.
What you should pay attention to in the mining sector (hint: it's not the news releases).
Plus: Eric's predictions for a volatile week ahead.
"My first thought is: OK, bring it on, baby! Let's have that rate increase. Let's get it over with here. Because typically, I don't think the Fed really could possibly read things as bullish as it might have started the year off thinking. Because it's really not quite coming together. Housing's weak, auto's week, retail sales are nothing special, you've got inflation affecting lots of areas... We have lots of reason for the Fed to be expressing concern. So, fine... Let's bring it on, let's see what happens. And I'm pretty certain that gold and silver will survive yet another rate increase. And prosper, quite frankly."
Despite another Federal Reserve rate hike already priced in for Wednesday, the U.S. central bank has “lots of reason” to be concerned, said billionaire precious metals investor and founder of Sprott Inc Eric Sprott, adding that gold and silver will “prosper” following the very likely hike.
We could possibly be looking at a summer rally here, according to Sprott, who told the Fed “to bring on” the likely rate hike.
“Let’s have that rate increase. Let’s get it over with, here. Because, typically, I don’t think the Fed really could possibly read things as bullish as they might have started the year off thinking. Because it’s really not quite coming together,” he said in a Sprott Money’s Weekly Wrap-Up on Friday. “Housing’s weak, auto’s week, retail sales are nothing special, you’ve got inflation affecting lots of areas… We have lots of reason for the Fed to be expressing concern.”
The Fed language will be key to pay attention to during Wednesday’s announcement, founder of Sprott added.
“I’m pretty certain that gold and silver will survive yet another rate increase. And prosper, quite frankly,” he said.
Latest historical trend is also on Sprott’s side as gold has rallied between 10-30% during the last five out of six Fed rate hikes.
The macro fundamentals are also working in favor of the precious metals, which could support prices going forward, Sprott pointed out.
“The macro fundamentals going on in the world that might also cause people to go to gold. For example, if you are Brazilian and your currency is falling 5% in a week, maybe you’d be better off owning gold. Things going on in [Turkey and Italy] are becoming potentially upsetting for Europe,” he said. “More and more exports data are suggesting that the world economy is slowing down, which would cause rates not to be continually pushed up.”
Out of the precious metals, silver was a big winner recently, gaining about 1.85% during the last 30 days and moving up above its 50-day moving average. Silver also had over 220,000 contracts of Comex Open Interest, which totaled about 1.1 billion ounces, according to Sprott.
Eric agrees that the average gold investor likely feels rather depressed. However, behind the scenes, there is a lot of activity. Kirkland was up 150% last year, and Novo has good performance. He feels we are still in the beginnings of a bull market for several reasons.
Real economic recovery is lacking as low-interest rates and money printing continues. The second half of 2018 should be better than the first. Commodity prices are looking good across many assets like copper, lead, and zinc. Many exciting things are going on in the commodity space.
Lithium, nickel, and vanadium are all also doing quite well. Much of the speculative investment in cryptocurrencies has now moved away from that sector. A decline in the economy and stock market could happen soon. Those two things will be critical to watch as a drop should get people thinking about gold and silver. Eric likes the recent bulk sample results from Novo Resources.
Marindi metals have found fine gold and recently nuggets. Marindi feels that the basin-wide theory is correct and that could mean a 250km by 250km with the potential for multiples of tens of millions of ounces.
Kirkland is doing very well regarding earnings and their stock still seems cheap compared to other companies. He discusses the mines and production details that they are working on. It takes work to find the opportunities, and you have to be on the hunt for them.
Your fortunes can change quickly in the natural resource sector. When things turn good, the stock prices often change fast. If you don’t have time to look, you need to invest with someone that can do that for you.
“The week has been—I would just say from a normal understanding of economics and financial situations—rather chaotic, to say the least… It must be confusing for the average viewer to try and figure out what’s going on here. Sometimes I suspect that we’re only told half of the information. And we’re told in a very biased way.”
The argument that when interest rates go up, gold goes down is a “totally fallacious” one, said Eric Sprott, billionaire precious metals investor and founder of Sprott Inc.
“I don't believe the argument, but it's an argument that's made … Interest rates go up, gold doesn't go up, it's totally fallacious. But you get it in the markets,” Sprott said during Sprott Money’s Weekly Wrap-Up on Friday.
What’s actually next in store for gold prices will be determined by how investors react to future financial conditions in the U.S. as the Federal Reserve proceeds to tighten its monetary policy, according to Sprott.
And a good sign for the yellow metal is that the economy might not be ready for higher interest rates, he noted.
“What is the market going to do as the Fed literally tightens? Other things are going to go down, car sales are going down. It's getting tougher for the average American,” Sprott said. “In one state they're raising [Obama care premiums] 64%, in another one, 98%. Who could afford this stuff? We say there's no inflation. I mean that’s a 60% rise, if you already spend 17% of your salary on healthcare, that would be an increase in your inflation index of 6% for the year.”
What worries Sprott is how the markets will react when these risks materialize. And the likely scenario for the billionaire investor is the Fed pausing its tightening cycle, which will benefit gold.
“I found it very, very instructive that the UK passed on raising rates … And the Fed may, in fact, have to pause here somewhere along the line because [the economy is] not nearly as strong as we're all thinking it is,” Sprott said.
The American central bank might at the end of the day say: “Well, you know, if the numbers aren't looking that good, we're not raising,” according to Sprott. “And it could be that that's ultimately what happens with the Fed. And, of course, that would take away one of the arguments for gold not going up.”
According to the CME Fed Watch Tool, there could still be three more rate hikes coming this year.
On Monday, Cleveland Fed President Loretta Mester also expressed her support for gradual rate increases.
“In my view, the medium-run outlook supports the continued gradual removal of policy accommodation; it seems the best strategy for balancing the risks to both of our policy goals and avoiding a build-up of financial stability risks,” Mester said in prepared remarks for a speech in Paris. “We want to give inflation time to move back to goal ... this argues against a steep path.”
Earlier this month, the Fed kept interest rates unchanged within a range between 1.50% and 1.75%, while also making cautious comments regarding inflation pressures.
