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Monthly Wrap Up

We Are in a Bull Market

Bob Thompson


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Watch Craig Hemke and Bob Thompson wrap up the volatile month of May in the precious metals market. From discussing price movements to analyzing market trends and offering insights into trading strategies, this episode covers it all. Topics Discussed:

  • Eastern Demand Driving Metals: The significant role of Eastern demand, particularly from China and India, in driving the prices of gold and silver higher, regardless of Western financial policies like interest rates.

  • Impact of Interest Rates: The influence of interest rates on precious metals, noting that even as interest rates rose, gold maintained stability due to strong demand. Future rate decreases are seen as a potential tailwind for gold and silver prices.

  • Market Psychology and Investment Trends: The importance of market psychology and investor behavior, pointing out that while the Western portfolio managers are not yet fully invested in gold stocks, the ongoing bull market in precious metals is not widely recognized, suggesting significant potential for future growth.

Announcer: You're listening to Sprott Money's "Monthly Wrap Up," with Craig Hemke.

Craig: Well, hello again from Sprott Money, It's time to wrap up a very volatile month of May, with your "Monthly Wrap Up." I'm your host, Craig Hemke. Joining me is our old friend Bob Thompson, a senior portfolio manager with Raymond James, in Vancouver. Bob, a good friend of the show, good friend of Sprott Money, good friend of Eric Sprott. So it's always fun to pick his brain a little bit. Bob, good to see you, my friend.

Bob: Great. Great to be on again, Craig, and tough act to follow when you had Eric on a few weeks ago. So, we'll see how we do.

Craig: He's always full of good information, too. No doubt about it. And hey, before we get started, again, we're now wrapping up May. Pretty soon will be moving into June. Remember, all this content comes at you from Sprott Money. And right now, if you are an existing customer of Sprott Money, go to, refer a friend, and save as much as 500 bucks on your next order. Hey, that's not a bad deal. So, again, go to Check that out. All kinds of great deals there as well. They are the sponsor of all this content. Thank them for that content. And we'll look forward to June. But before we get to June, we gotta wrap up May, and what a month it has been, Bob. We've watched gold break out of its almost four-year trading range, back in March, and shoot higher. We waited patiently for silver to do the same, and it did so a couple of weeks ago. What is going on here? What do you think is driving all this, Bob?

Bob: Yeah, you know, it's interesting. A lot of talk about buying in the East, and that sort of thing. But I think the psychology of this is really, really important. You know, when interest rates go up, gold doesn't do very well. So, but it still did okay in 2022-2023, right? The stocks didn't. And that's because of this demand that's there for the metal. But here's what interesting. We'll talk about this, I think, a little bit later. This demand from the East, you know, people in China, people in India, people are looking for a better lifestyle, trying to, you know, their currency may be dropping. Hard times, so they're putting their money into gold and silver. They don't care what the COT is. They don't care what the Commitment of Traders is. They don't care about ZIRP, zero interest rate policy. They don't care about NIRP, negative interest rate policy, and they don't care about PIRP, which is positive interest rate policy. It doesn't matter to them.

What they care about is that they want to acquire silver and gold. So, you know, the futures markets were not made to control the price of a metal. The futures markets were made so commercial companies could sell forward their grain or their oil or whatever, and lock in a price for themselves, to make sure that, you know, they were profitable, they could control their costs. And now it's got crazy where it actually controls the underlying metal, so hopefully we go back to the supply and demand, which is important. But, you know, we'll talk about the shares a little bit later, but I just wanted to mention that, again, this demand from the East, which is pushing silver and gold up, those people don't buy the stocks. They don't care about owning a gold stock. They care about owning a metal. Who are the people that are interested in buying the stocks? It's Western portfolio managers, hedge funds, mutual funds, etc. Well, guess what? They aren't ready. They aren't ready yet to buy, because they're saying real rates are very, very, very high. Gold shouldn't be up. It's not up. It shouldn't be up. I'm not gonna buy gold stocks. Right? So, I think that's the differentiation, is the end buyer is a different end buyer for the equities and the metal, and the end buyer for equities, they aren't ready yet. They got caught by surprise here.

Craig: Well, and you mentioned a good point about this physical demand. Even the Silver Institute, as they estimate, the last four years is a supply deficit of 700 million ounces now, 100 million four years ago, in each of the last three, if you wanna average it out, about 200 million. And that is not factoring in Eastern demand so much. Oh, sure, industrial demand, but not this investment demand either. I just, you know, we've talked for a while, Bob, ever since the Shanghai Gold Exchange opened 10 years ago, about whether that Eastern physical market would place pressure, and ultimately maybe make the Western paper markets irrelevant. Do you think we're trending that way finally?

Bob: I think it is, and, you know, in markets, they say your risk happens slowly, and then all at once, right? And it's the same thing. It's kind of that complexity theory. So, things are building slowly, and then suddenly you get this surge. And let's go back, because I was talking to Maria Smirnova, and she manages, for Sprott, their silver equities fund. And we were having a great chat. I talk to as many people as I can. You always get a tidbit of information, you get 1% for every person, you increase your knowledge by 100% over time, right? And Maria mentioned to me, she said, you know, "We've had four years of this silver deficit, right? We all know that. Everybody knows it. Why isn't the price going up?" She said, "The same thing happened with palladium. There was a four-year deficit with palladium, and everybody was wondering why isn't Palladium going up? Why isn't Palladium going up? And then suddenly, you know, in five years, 2016, it was $500, and it went to $3000 in five years," right?

So, that was a multi, multi, multi-bagger. And once it happened, it happened fast, and it comes very, very fast. And I think that's important. And, you know, just one more thing, to give an analogy. My little 6-year-old, I have to read to him every night before bed, and he loves to hear about the Titanic. He's infatuated with the Titanic. So, I was reading to him a few weeks ago, and they said, you know, with the Titanic, this unsinkable ship, as it was starting to go down and all the people were on the deck, they were still playing jovial music. The band was still playing jovial music, because this is unsinkable. It's just an exercise we're doing. That reminded me, that's what's happening right now. We have the signs, the ship is tilting, but they're still playing jovial music. Everything's wonderful. Everything's great. Then what happened when everybody realized that the ship was going down? They played "Amazing Grace." That was it. And they knew that that was it. And the ship went down a few minutes later. They're not playing "Amazing Grace" yet. They're still playing jovial music with the economy, but it's coming. It's coming.

Craig: Well, and to that point, as we begin to look into next month, you know, this June FOMC meeting is looming in a couple of weeks. Every quarter, on the quarter, you get a summary of economic projections, where all these goons all get together and they say, "Well, I think unemployment's going here," and "I think the inflation's going there," and they put it all together into a table, and that's somehow, just, you're supposed to discern what's gonna happen. But that's what the market looks at. What are you looking at? Do you think the U.S. economy is, and Canadian economy for that matter, finally beginning to roll over and tighten up? Or is it just, eh, you know, financial conditions are loose, and everybody's doing great.

Bob: Yeah, you know, and I don't focus on too many of these meetings. I look at the big trend. And the big trend is we're a lot closer to interest rate decreases than we are to significant interest rate increases, right? They might hike rates once more, just to scare everybody, but we're a lot closer to the trend is that the rates are gonna have to come down, especially after the election. So, looking at that, I mean, that's a big tailwind for metals. If we have to fight a little bit here for a few months again, then so be it. It'll be a great opportunity to buy some more. But I do think, you know, people in our industry, a lot of times, have way too short of an investment horizon, right? Look out, as Stanley Druckenmiller says, what's the world gonna look like in 18 months, and invest like that now. Well, I think in 18 months, the economy's gonna be a lot weaker. If it's not, then they're gonna be running $3 trillion deficits a year, and something's gonna break when they do that, right?

So, I mean, and I think most of the listeners here, and I'm sure no sympathizer for the central banks, but if you were trying to raise interest rates and slow things down, like the central bank's supposedly been trying to do, and then the government's running a $2 trillion deficit fighting you, they're fighting you, right, by giving money to everybody, well, no wonder the economy is still kind of afloat because they're just blowing their brains out on the fiscal side. Right? And that's for political reasons, election years, all that sort of stuff. But all that comes to an end sooner or later, right? So, I think when rates start to drop, or they do yield curve control or something, because you can't continuously run trillion dollars a year in interest payments, that's gonna be a huge tailwind. And hopefully, that's when the Western investors say, "Wow, now it's time to buy gold stocks and silver stocks."

Craig: Well, Bob, you've walked me perfectly into where I wanted to go with this. You're such a good guest. You'd mentioned earlier, the retail fund manager, and the hedge fund, and the family office and everything, looking at the gold price, and going, "Wait a second. Real rates, at least as they're calculated, are positive. So I can't buy gold stocks yet." But you just described a scenario where real rates will be going negative. And all of a sudden, there's gonna be a lot of catching up to do. We're not seeing the catching up yet. So, in the latter half here of this podcast, where...let's start with your mining clock, the Bob Thompson proprietary mining clock. Tell everybody where you think we are, and then we'll start to kind of bust out some of the internals from there.

Bob: Yeah, you know, it's been stuck in neutral, or in reverse for a couple years, right? The clock doesn't move like normal clocks. It stops, it moves forward, jumps ahead, etc. But we are in a bull market. We are in a bull market. If you look at the price of gold, you know, 2015, it reached $1050. It's been a tough bull market, and you never know you're in a bull market until the latter part of a bull market, right? When you're comfortable, and you're sure you're in a bull market, you better be kind of scaling back and getting out, because nothing's for sure, as you think, things climb a wall of worry. And that's what's been happening in gold and silver. So, the mining clock has been progressing forward. We're probably around, still around 7:00 right now, 6:30, 7:00. You know, when do you sell? 9:30, 10:00. You don't sell everything, because you do get that parabolic move up at the end of the cycle.

But we got a long way to go here, right? There has to be a lot of exploration. There has to be a lot of money raised. You have to start getting substantial M&A, and that's starting to happen, not necessarily in gold and silver as much, you know, but BHP's making a big bid for Anglo, and, you know, it's starting to happen in the commodity space. So, as we move forward there, over the next few years, you're gonna see more and more and more money spent. You're gonna see more M&A, more discoveries, hopefully. And when that starts to happen, and people start to, and these companies start to spend their money like drunken sailors, right, and overbid each other for other companies, do these stock-for-stock takeovers, etc., using their overvalued stock to buy somebody else's overvalued stock, that's telling you you're getting near the end. Might be some parabolic growth after that, and we're a long way from that. So, I hate to, you know, people scratch their heads and say, "We're not even in the beginning of a bull market yet, and he's talking about when to sell." No. Not at all. You just gotta be aware. We're a few years down the road, a few years down the road, but this is a cyclical industry, and you have to be prepared for that. And that's the mindset, and I talk a lot about psychology, because there's no way that you could hold through all this volatility unless you're a true believer. Right?

Craig: Right.

Bob: And that's good. But if you're a true believer too much, you don't see the signs at the top. Right? And you're so entrenched, and you do the round trip all over again, right? So, that's a lot of what we do in our business, right? When dealing with senior mining executives, we kind of remind them, "Hey, this is a cyclical business, so let's make sure we have your legacy [inaudible 00:12:05] etc."

Craig: So, at 6:30, 7:00 on the clock, people, I'm sure, that own the mining shares looking around, they're going, "Okay. Well, my exploration companies haven't really moved yet, even though gold's $2400 an ounce, they're still raising cash to have enough money to drill things out, prove things out." So, there's no rush there yet. Some of the bigger ones, you know, have moved. Like, Newmont's moved up 30%. But at $40 a share, it's basically the same price it was 20 years ago.

Bob: Right, right.

Craig: All right. So, where is the sweet spot at 7:00? Is it a, like, a mid-tier, kind of junior producer? I mean, what is the...what kind of [crosstalk 00:12:43]

Bob: I think we're still in the special situation area, right?

Craig: Okay.

Bob: So, companies that got great discoveries, you know, I don't wanna talk individual stocks...

Craig: Right.

Bob: ...but there's been a few big winners that have had some great discoveries, so money's coming into those ones, but people are still kind of looking for those big winners, right? They're not willing to invest in the whole space. So, the big winners have done well. I think the senior companies, people have been burned by them many times, from the last cycle, but I think this quarter, next quarter, you know, a Newmont, an Agnico, Barrick, came out with relatively good earnings, right. And the markets are gonna have to start to look at that, right?

Craig: You'd think.

Bob: And when they look at that, Newmont's the first they go to because it's the only stock, only gold stock in the S&P, right? So, money goes there, and then people say, "Okay, I'm willing to go into the other stocks." But here's I think what's super important, Craig, is that we're in a bull market already. People just don't realize it. I know the juniors haven't moved yet, but there's a lot of reasons for that. The Russell 2000 micro-cap stocks, even outside of our space, small-cap stocks have done horribly, all around the world, and there's lots of reasons for that. But, you know, the gold and silver small caps are kind of lumped in with all the other small caps in the world, in every sector. They haven't done well. Their time will come. But I think what's important is that, you know, as gold starts to move, then money starts to go into silver. You've talked about the gold stocks are a lot more related to the silver price than they are to the gold price. And I think that's maybe an accidental correlation, because gold stocks start to move later in the cycle, and silver starts to move later in the cycle, with gold stocks.

So, I think, you know, that's what's important. Also, we still have these big stocks, like Nvidia and all these things. People are still racing to get those stocks right? Hedge fund managers get paid quarterly performance bonuses, right? So they're gonna chase whatever is doing well now, so that they can make as much money as they can now. I mean, that's their time horizon. So, when these stocks start to roll over, when there's no money to be made there anymore, they don't even have to drop a lot. They just have to kind of go sideways and not do anything anymore. Then they're gonna look for other areas of the market. And that's when the capital flows start to come in. And I've been doing this 30 years. I don't have any solid numbers, but I can just feel it, by looking at the tape every day. You can just feel that the money's starting to come into the space. Not a lot yet, but the money is starting to come into it yet. And you know what's gonna shock a lot of people? We are already in a substantial bull market, that has beaten the S&P 500 over the last five years.

So, if you take a look at XME, XME is the metals and minerals ETF in the U.S., not just precious metals, but it's all metals and minerals. It's up, over the last five years, by about 165%, since mid-2019. The S&P over that timeframe is up around 85%. So, it's almost doubled the S&P already, and nobody even knows.

Craig: Nobody... Heck, I didn't know.

Bob: Everybody thinks the S&P 500's the best place to be.

Craig: Right.

Bob: No. Not at all. That you would have doubled it, in the last five years, in the metals and minerals ETF. So, those are big stocks. I'm not talking about small stocks. Those are the bigger stocks. But, again, money flows downhill. So, again, we're in a bull market, and nobody even knows it.

Craig: Right.

Bob: Now, when everybody knows it, and everybody says, "This is the only place ever to invest," you know, guess what? Should be time maybe to look other places, but we're a long way from that.

Craig: Yeah, probably need, you know, like I said, we... Gosh, if silver could only get about $30, you know, and all these things are happening, gold could break out, and we still don't get that momentum, but it, just one last question for you. And I guess it's two-pronged. At what point does the growth of the explorer and the mining company began to look preferable to owning the streamers and the royalty companies, you know, and kind of a seesaw? On a bigger picture, at what point does the value of the gold miners begin to become more attractive than the growth of the Nvidia? Or, do those kind of things all factor in into a bigger outlook as to what could drive the shares finally?

Bob: Right. I think the big mistake that people make is, you know, relative valuation, right? So, if something is growing at 20 times, and the market's willing to pay 60 for it, you know, that's what they call a PEG ratio, price to earnings growth. You're 3 to 1, and that's fine. I mean, it could go to 4 to 1, whatever the case is. But sooner or later, it gets to the point where it's exhausted. Right?

Craig: Yeah.

Bob: The amount of money that can go into that sector gets exhausted. When that happens, I mean, just mathematical. I mean, it stops going up. Right? And so, and it starts to go down, because people start to take profits, and then they look at other sectors that are trading at very, very low valuations. But I'll tell you what we're in the middle of right now, and I think this is super important. I follow a commodity hedge fund manager in the U.S., and he said he went out with a buddy of his recently that is a generalist portfolio manager. Right? So, he doesn't invest in anything other than, you know, indexer stuff.

Craig: Right.

Bob: And he said, during their coffee, he was absolutely panicked, this generalist portfolio manager. He was actually sweating, and he's looking at his phone, and his friend said to him, "What are you doing? We're trying to just have a coffee here." He said, "This Nvidia thing. I gotta buy it. I have to buy it. I gotta get in." He said, "Whoa, whoa, whoa, whoa, whoa, whoa. Do you like it? Do you wanna buy it?" He goes, "No, no. I don't. But I gotta buy it, because," he said "it's 5% of the benchmark," or whatever the case is...

Craig: Yeah.

Bob: "...and we're underweight, and we're underperforming the market. We gotta get in, to get market weight." And he said, "So, you don't really like it, you don't wanna buy it, but you're gonna buy it anyway." And he said, "I have to, because we're underperforming the index." Right? So, when everybody gets market weighted of things like that, then, you know, they're probably not gonna go over market weight, and that's when the end of the cycle happens. I don't know when that happens, but, you know, Paul Wong, used to manage money with Eric, told me that about gold stocks. We were talking about it long time ago. I said, "When do you sell?" He said, "You sell when the generalists have a market weight in gold stocks," because generalists are never gonna go overweight in gold stocks, right?

Craig: Good point.

Bob: But they will... Right? But he said, "If they're missing out, they will go to a market weight." You know, right now, their weight is zero, so I don't think we have anything to worry about. But when their weight gets up to 6% or 7% or 8% or 9% or 10%, which is what the TSX index is, yeah, you have to start saying, "Who's coming in to buy after this?"

Craig: Right. That, you know, it's frustrating for many of us, you know, because you think, "Wow, we should be doing..." But at the same time, if we're confident about where price is headed, I don't wanna make it sound like it's inevitable, but it probably is inevitable that there will be a time for all these things to shine. The hard part is knowing which ones to buy. You've gotta have some, you know, people working on your side to help you through that. That's all part of what's fun about being friends with Bob. Bob, you have something you crank out. Is it once a month, your newsletter, called "The Gold Digger?"

Bob: Yeah, it's called "The Gold Digger," and we talk a lot about the mining clock. We talk about where we are in the cycle. We don't mention individual stocks very much, because, you know, everybody's goals and objectives are different, and I should say that nothing I'm saying here is advice, right? Everybody's got different goals and objectives, but, you know, if people are actually looking at, you know, the news releases out there on individual stocks, you're gonna see something, and you're gonna see that Eric Sprott has taken some significant weights, and increased his exposure in some silver stocks. Now, Eric has one saying, and that is, "Press the bet. When things are going well, press the bet, and increase your exposure." He's right in the middle of that right now. You can see that, some of the news releases. So, you know, that's, I think that's a positive sign for our industry.

Craig: No doubt. And, too, and again, your newsletter's free to anyone. How do you get registered for that?

Bob: Sure. It's just It's important to .ca, because we're in Canada, but But yeah, we'll certainly put you on the list. We come up with the chart of the month, lots of great things, lots of links, so [crosstalk 00:21:11]

Craig: Awesome. Send you an email, at that email address. And again, Thompson with a P.

Bob: Thompson with a P. Exactly. That's right.

Craig: All right. All right. Well, Bob, it's always so much fun to visit with you, and we always learn something. I always learn something. And I'm sure everybody else does too. So, thank you for your time. I wanna thank everybody for watching. We've now come to the end of May. Gosh, we're almost halfway through the year, which is just remarkable. It's gonna be another busy month, though, in June. No doubt about that. I mentioned that Fed meeting. Gosh. Who knows what the impact of Shanghai and the East is gonna have, the silver price. Keep an eye on the Sprott Money channel. We will of course have another "Monthly Wrap Up" at the end of June. We'll also have "Ask the Expert." We'll have the monthly "Precious Metals Projection," with Chris Vermeulen. If you missed that a couple of weeks ago, go to Sprott Money, click on "Insights," and podcasts and find it. Boy, Chris did a great job of laying out where prices might go from here, so you're gonna wanna watch that too, and we'll have another episode in June. So, what I'm getting at is subscribe. Maybe like the content, wherever you're watching this, YouTube or whatever, so that as this stuff comes out, you're be sure to notified. You'll be notified, you won't miss anything. And it's gonna be a busy month. Bob, thank you so much for your time. It's always fun to visit with you, and I'm sure we will do this again soon.

Bob: Thanks again, Craig. Talk to you next time.

Craig: Let's do it. And again, from all of us here at Sprott Money,, thank you for watching. We'll have more content for you next month.

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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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