Silver Price Remains Volatile Around $30 Level | Arcadia Economics
Summary
Transcript
These consolidation periods are very good for gold and silver. 30 being a psychological number. That’s great. And it allows a lot of the silver primary silver producers finally start making money. Well, hello there, my friends. Chris, Marcia is here with you for Arcadia economics and excited to be with you today, as we are, I suppose, officially in the volatile portion of silver floating around 30. I’m sure all as well, that everyone remembers Friday where we saw quite a sell off, both gold and silver. Heavy volume, the silver price going under 30, gold getting down to the couple bucks away from breaking through the 2300 level.
In some ways, perhaps not entirely unexpected, given the rally we’ve seen over the past couple months. And anyway, to dig into that, as well as an upcoming Fed meeting and whole host of other interesting things going on in the market, is Steve Kope of silver Viper. And Steve, great to have you back on here and a lot to discuss today. So how are you doing to get us started? Yeah, I’m doing well, Chris, always great to be on. You know, it has been a really interesting time and it’s been fun from kind of, you know, video to video to see where we’re at, see the things that are happening, see the weird dips in the middle and what’s going on.
It’s always fun to dive in. So I’m looking forward to it. Well, why don’t we hop right in? And as we’re recording Monday in the afternoon, we see silver up at 29 80. So it’s recovered a little bit from the Friday afternoon and Sunday night lows. See here it got down to, let’s call that 29 23 or so, trading a little bit higher. And quick look at the gold price Monday afternoon, 23 28. Steve, I guess the first thing I’d love to dig into is after we’ve seen everything that’s happened over the past couple of months, silver finally breaking 30.
A lot of us, we were wondering, does it get through 30 and keep going, or does it get pummeled down similarly to what we saw in 2021, we actually had a couple of weeks where silver did stay above that $30 mark, dropped back below that twice last week. And curious where you see things as we stand today. I think at net, it’s a good thing that we saw silver stay above that level and hasn’t really done one of those sharp drops below it. But what do you think about what we’ve seen over this past week? Yeah, I mean, I get, I always preach the consolidation over longer periods of time is healthy.
You know, when, when these things move too fast, too quickly, you get huge swings. And that ends up, especially in the gold and silver market, really scaring a lot of investors that have, are traumatized from some of the longer down periods in the industry and always kind of looking for an excuse to jump out. So for me, what I kind of get, I think is really healthy and interesting this time is, yes, it’s been consolidating around 30 or over 30 for the last couple of weeks. Few dips, but the dips are short. We get a day, a day and a half of the price going down.
And then it wanting to show strength and pop back up. And then you get a day like Friday where the powers that be really lean on it. But then you’re back up again on Monday after kind of a weekend thinking about it and trending the right direction. I think the market looks really healthy right now. And again, these consolidation periods are very good for gold and silver. 30 being a psychological number, that’s great. And allows a lot of the silver primary silver producers finally start making money at $30. Silver, the ones that have byproducts or silver is a secondary asset, have been able to make money because the gold company should be making a lot of money with gold at these prices.
And copper has been doing well in a lot of the other primary assets that silver can be a byproduct of. So again, I think this is all really healthy. It’s great that you can finally start giving a chance to those primary silver deposits and have them make some capital moving forward. Hopefully we see that price continue to jump up and trend in the way it’s been going through this year, which has been fantastic and ultimately end up pushing through new highs. And it may not even take that long. I mean, there are a lot of catalysts that could be coming here in the next month or two that could really push silver over the top as well.
Yeah, I know what you mean. And certainly one thing I found pretty interesting here is that in May, we finally had the gold ETF flows turned positive. So as we can see in our chart here, had been largely the blue line representing how much metals in the ETF’s. This does also include the Comex we can see, really, here’s when the rally began back in November, or I guess October, really, when we had the situation in the West bank. And you can see the yellow line prices going up where we’ve had metal coming out consistently until really the last two weeks.
And it’s interesting because we’ve seen a rally so far with very little institutional participation in the west not seeing an uptick or a surge into the retail on the physical side either. So perhaps a sign that maybe things are starting to take hold in the institutional market a little bit silver, a bit more mixed. See it did have a couple inflows here and then has been steady since then. Anything that you’ve been noticing in terms of any changes of funds getting back into the metals and then by extension the equities as well? Yeah, I mean and this, this is something that I think a lot of investors don’t realize or haven’t noticed.
You know they look and they, the disconnect between the silver and gold price and the equities and the price of a lot of things, it’s, they’re not trending together and that’s frustrating. Investor, you know I get, I get a lot of emails and I know other CEO’s, you know, that I talked to get a lot of emails from retail investors saying like whats wrong with your stock? How can your stock still be down when gold and silver are up at these phenomenal levels, gold at all time highs and silver recovering and getting to very attractive levels.
But it speaks to that the metals prices are rising not because of the investment from our traditional funds and retail investors and different people are stacking physical themselves. Maybe thats first, but then the next step in our sector is to start seeing ETF’s go up and then you see the producers going up and people investing in that and then it trickles all the way down. These metals prices are moving from other sources and we’ve talked about some of those in the past, but there is a delay and a lag to a lot of the ETF’s and the equities and various things catching up.
And I think that’s what’s really exciting about the investment opportunities in those products because you’re still being, you’re able to be contrarian on the paper side while seeing these metal prices that are already trending up and running, which makes those paper assets look even better when a company even like ours, we’re a smaller explorer, but we’ve got 700,000 gold equivalent ounces sitting there in a resource mixed 60% gold, 40% silver or 49 millionoz silver if you want to silver side. And our share price has been pushed down for two years because that chart that you just showed, money hasnt been able to flow.
There havent been net inflows into the mining funds into the ETF’s. Its been a steady outflow for two years and were finally seeing some money. The last financing we did, we saw eight funds participate. That was the first time in two years any fund has had any capital to participate in a placement. Thats whats giving me hope. And that were right at the start of a rebound, in the equity side especially. But theyre still depressed. Theres been a little bump up in some, but again, our stocks are trading and reacting overly on those days where we do have these down days of metal prices.
So again, I think thats what a lot of investors need to look at is realize that it takes time for the equities to rebound and they wont rebound right in line with the metals prices moving up. But it should give them even more confidence of the outlook and the prospects moving forward that these stocks have the potential to be ten x, 20 x, you’re going to see 100 x, you’re going to see bigger gains across some of these stocks and the right ones that can, on top of metals prices, on top of money coming back in the space, start producing good results, start getting to that point where they’re selling their project to one of the big mining companies.
Thats whats fun about the equity side. Obviously, even more important into peoples portfolios is to own the physical and have that hedge against their other investments and building out a safe part of your portfolio, but allocating some to that more exciting kind of treasure hunting gambling side that exists out there that people can make a lot of money in. Yeah, and in some ways, I suppose you could look at it as encouraging in one sense that we havent seen the money go in there, because certainly, if and when we get to the point that the american institutional market is putting money in there, it certainly would have the potential to have quite an impact.
Steve, I would imagine that maybe one of the things holding that process back from getting started a bit more actively is what we have had out of the Federal Reserve, which is obviously a thing people watch around the globe, but particularly in the west here, where the rate cuts have not come yet. We do have a meeting on Wednesday, this week where I don’t think we will be seeing a rate cut. In fact, we see 99.4% probability of another pause, as well as the following meeting in July, seeing 51% chance of pause in September, 45% chance of a cut.
And as you go further out, the probability cut priced in a little more significantly. Obviously a bit different than where we started the year, with expectations of six or seven rate cuts. But curious what you are expecting on Wednesday. Factoring in that we did have a higher than expected job report, which we’ll dig into that one in a second. Although we did have unemployment edge up to 4%, Jerome Powell has mentioned in the past year that rising unemployment numbers could be another thing that could force rate cuts. And here we see back in May of last year at 3.4% and then in June up to 4%.
So is getting higher. And curious where this leaves you feeling about what we might see on Wednesday. Yeah, I mean, it’s interesting because, you know, and then I guess all the other one we always get is, yeah, they threw a massive jobs number at us, but then let’s see what that looks at when it gets revised, because I always love that chart that the media seems to always ignore. And they tend to be all, you know, traditionally, most of them are a lot worse than what the initial numbers. So we’ll see what that gets revised to that last month, too, with the establishment number surging 272,000 while the household survey tumbled 408,000.
And anyone who’s wondering the difference between the two here is one of the keys. Household survey has no duplication of individuals because individuals are counted only once, even if they hold more than one job. In the establishment survey, employees working at more than one job are counted separately. So again, we see that same pattern of could you say the jobs are going up, but if someone’s working two or even three jobs, seems to be a lot of that in the numbers. Yeah, that’s all. I mean, you can’t, you see, how many times do we see, you know, the big tech companies and all these big layoffs of these mass.
And those are the big, like, high, nice paying jobs, and those people end up becoming, you know, an Uber eats driver, different as one day. And then they’ve got, you know, they’ve got four or five different side gigs that they’re doing to make less money than they were making in their one big job, but they count as four or five people in that jobs number. So it’s always, you like to see people’s quality of living and other things going up, and that’s not what’s happening with this inflationary period we’ve been in. And what it costs people, grocery stores and fuel costs and other things that we’re seeing rise, even housing not really getting under control, come down a bit, at least where I live.
But that’s as soon as these rate cuts start, a number that will start to rebound back up as well, and people get confidence moving in and wanting to buy more homes, I’ve all, I mean, that jobs number we know forever. We’ve talked about this. That job number and increase in jobs has always been a manipulated and terrible number, especially coming close to an election. You know, the powers that be, you definitely want people to feel like employment’s as low as possible. Those lives are as good as possible. So they’ll try and tell you that they are.
But again, we see those numbers adjusted all the time. And obviously, you know, people and a lot of people don’t want jobs. I see like wanted ads everywhere here in Canada, but the people don’t want to take those jobs that they’re heavily overqualified for. So it’s, there’s lots of different things that go into that. But I think most people would agree that, you know, from a time period of feeling like, you know, your salary and money is going, is going a lot less than it used to as far as what you can get for what you’re making.
So again, I think Powell could go any which way on that. You know, I would imagine if, you know, like we’ve kind of talked about in the past and off camera, but if they’re trying to help people get out of short positions in the medals and do different things, then, you know, they’re going to be overly, you know, bearish and, or dovish and be, give us an idea that rate cuts aren’t coming till the end of the year. Maybe they surprised us. I mean, heaven help us if they were surprised that some of the June 1 year and three follow the bank of Canada and Europe and did fall in line and start cutting rates, which to some level, I mean, it had to happen here based on a lot of things that were happening in Canada.
But a lot of times these things, the US had been front running the other two on a lot of these rate hikes. So it’s interesting that ECB and Canada are cutting before the US starts cutting. And I think that’ll put pressure on the US to cut sooner than maybe they want to as well. Yeah, I was going to bring that up because as you mentioned, we did have rate cuts from ECB in Canada last week, which of course, with them cutting and the Fed not cutting yet, putting upward pressure on the dollar and really in some sense is pretty remarkable what we’ve seen out of both gold and silver over these past couple of months, even with the higher for longer.
Although, Steve, one last thing about the Fed that we were talking about before we hit the record button, and you’ve mentioned often that I thought would be good to explain to people, you’ve talked about why you think that when they hike rates isn’t really going to be successful at bringing down inflation. I mean, the numbers have come down a fair amount since two years ago. Obviously we’re still well above target. But I thought that was a good point that you’ve made before and perhaps you could just explain what you mean when you say that for people.
Yeah, I mean, to me, I guess to me, inflation and the way they calculate, know, our governments calculate it and maybe it’s slightly different in Canada, in the US, the breakdown percentage wise, but the way they always present it to me always really bugged me because they were presenting it, you know, talking about like the grocery store and prices in the grocery store and we’re going to help you out here, we’re going to stop inflation and that’s why we’re raising interest rates. And I would always sit back and I would look at it and I think others do as well.
And you’re, as you start making cost of money more expensive to borrow, other things that are happening in the world that raising interest rates weren’t going to stop, we’re coming out of COVID we had supply chain issues that were driving prices up and other things in what you’re doing, other things were already raising the prices that were out of the control of what interest rates were as well. That side of it. And they would always present that side of it is what, this is how we’re going to get your food prices. This is how we’re going to get all these daily expenses for you under control it.
By doing what they were doing, they were further increasing the price of goods and putting pressure on people, which then people, you know, start saying, well, my money’s not going as far, I need a bigger salary raise to make up for it. But then, you know, the people get a salary raise and their work says, well, now, you know, the product that, you know, we’re paying these people more to make is costing us more to make and we’re going to rise the prices even more. So, you know, it’s a spiral that you’re never going to get under control.
Now raising interest rates if they want to present it. And be honest, in Canada, a third of our calculation is on housing. And raising interest rates will tackle inflation on housing because if it costs more money for people to buy a home, to borrow to make those payments, they can’t afford to buy the homes. In theory, prices are going to come down. We talked about off camera the problem with that for the canadian inflation numbers is we have a record number of new people coming into our country that have money, that are growing our population at a record rate that we haven’t seen in my lifetime, certainly and probably in its history.
And so you have, okay, in Canada we really are doing this interest rate hike to tackle the housing side even if they didn’t want to admit it because it’s been something that our politicians have been talking about for years and years and years is we need to make housing more affordable. And especially in the large cities where most of our population is based out of in Montreal, Toronto and Vancouver, Calgary. And so yes, we curbed our housing prices a bit. Now the problem is they didn’t curb them as much as they want. And when you’re bringing in more people, you know, you’re just having way more people with money that are looking for housing and you’re, the government’s never going to be able to subsidize housing to a level to make up for the amount of people that are coming into our country.
So you’re not going to get, you know, you’re fighting yourself or the government’s fighting itself by because they want to bring people in because they want to increase the tax base and that helps, you know, fund everything that’s going on here. So there’s all these different, you know, things at play. But it didn’t tackle housing here and now they’ve kind of given up because they’ve got themselves to a point where we had to start dropping our rates because it was hurting too many other things, you know, from the bank of Canada’s approach, which is supposed to be independent from, you know, Trudeau and his government.
And they came out this week and we’re very adamant that they’re very independent from Trudeau even though when politicians are calling on them to do certain things. But again, you can tackle the housing side by raising interest rates. The other side of it that we saw where they in the US would try to manipulate the number in certain months is the fuel side, which is again separate from the grocery side and how you’re calculating on that. And we see the US in a month start tapping into that reserves and just pumping barrels of oil back into the markets to try not fuel prices down.
But that’s a temporary fix in those months and then it’d be like, oh, the next month inflation’s back up. Yeah, but look what fuel prices did because that wasn’t sustainable and how you were knocking those down. You can tackle it on the housing side. Youre certainly never going to tackle it on what people are seeing in stores and the cost of goods. To me, raising inflation will never ever tackle that. But thats how Powell, thats how these guys, how they were marketing these rate hikes, were really trying to tackle bad inflation with what was going on in the world, that raising of interest rates will never tackle that inflation.
At some point it gets so expensive that yes, it is slowing. Fine were slowing because weve made these goods cost so much that people just arent able to buy them and won’t buy them anymore. And in that at some point you’ll start to, you know, recollect some of that. But people right now are starving or people are, you know, buying. They’re not buying. If someone was before, like, I want to eat really healthy. I’m going to buy organic foods. I’m going to do this, that and buy, you know, the premium food now, you know, they’ve got to take a step back and they’re saying, you know what, I’m going to buy something, you know, in the middle ground or the generic food or some people go take the next step back and now they’re buying, you know, that day old food and they’re doing all just different ways.
And the people that are selling them, you know, we saw, how many times do we see, okay, well, the package costs the same, but the amount of food in the package has been decreased by 25% and people don’t realize it. So they’re all different ways that people are tackling this. But what they are, they’re not getting as many foods. I go to the grocery store now and just like for a week or food for kids and family and that, and I like it. I’m like, it’s instantly 100 or $200 and I don’t feel like I bought anything.
And that’s what you hear from people across the board. So when you say, okay, we’re tackling inflation and this is what we’re tackling, they haven’t gotten that. None of what they did controlled that at all. And that’s where I come from when I say that and whether I’m right or wrong, I don’t know. But it just seems like common sense to me about that side’s going in and where that comment comes from. Yeah, well, also, and it often takes longer to manifest, but you have that impact of if the interest cost is higher, that means theoretically the business getting less profitable, less units and a lot of that cost passed along to the consumer.
Certainly, as we’ve seen with tariffs between the US and China and a whole series of other things that are far less than ideal. Although, Steve, there was one last thing I wanted to run by you in today’s show. We did have the election in Mexico, and now we have Claudia Scheinbaum in charge. I’m sure it goes without saying that you’re struggling as you miss the presence of Amlo, and it’s on some levels a very sad day, although you and I were talking on Thursday, and you pointed out that she’s also advocated for boosting the extraction of critical minerals such as lithium and copper.
Gee, there’s something else that could fall in that bucket. Although again, what everyone’s wondering, is she going to change the policies? There’s been a hold on open pit mining and just anything that you’ve seen or heard or any thoughts that you have on the change in policy or change in president here and perhaps where she may go with her policies. Yeah, I mean, the general consensus is that she’s not going to be as extreme as Amlo. I mean, obviously the same party. And she’s saying what she’s saying right now post election. Obviously, you know, I want to continue Amlo’s policies and different.
But like you say, she, she was very adamant about her, her talk of increasing those critical minerals, lithium, copper, what’s, I mean, I’ll throw silver into the mix, even though she didn’t say it, but especially the lithium. I mean, all of these, a lot of these in Mexico and every single lithium deposit that exists in the country. And Steve, apologize for interrupting, although, look at what they say here to support production of electric vehicles, those such as. Yes, we’ve always talked across not only Mexico, but why is silver not included as a critical mineral? And it doesn’t get included by certain criteria.
Apparently it had been created to designate exactly what a critical mineral is, but it is a critical mineral by all intents and purposes and absolutely essential. And we don’t need to dive into the supply and demand and the shortages of above ground silver and what’s come, because we’ve talked about that in the past, and I think a lot of people are very well aware of it, but it is certainly something that is highly critical. And people and governments are going to have to start securing that supply. And the east has figured that out, and they’re securing their supply any number of different ways, which is why we’ve gone from 165 years of above ground silver to one to two.
And so it is a critical metal and should be included. But if we know, if we just ignore silver for a moment and focus on, she said, such as lithium and copper. Well, every single lithium deposit that exists that isn’t in production in Mexico requires open pit mining to mine it. There is no deposit that I’ve heard of what it’s hosted in, that you could go underground and mine the high grade lithium. So if she is going to advocate for the extraction of those minerals, she fundamentally has to cease the restrictions on open pit mining that Amlo, you know, they said they got under him.
They haven’t granted any new open pit permitting. Well, that obviously has to change. And, you know, with copper and with some of these other minerals, like certainly all the product, the deposits that have silver as a byproduct that need open pit mining will. Should start to get, you know, interest. And I think she’s more open, from what I’ve heard to talking and understanding, has a bit more of an understanding of the mining industry, and I think things will relax under her, certainly, at least a little bit. But we have to wait and see, and she doesn’t take, you know, the change of control, I guess, is until the end of the year.
So in the interim, we’ll wait and continue to go along with Amlo, but there will be a transition, and we’ll see what happens. But there is a lot of optimism in our sector that, you know, she’s going to be a lot better for mining in Mexico than what Amla was. Yeah. And it’s interesting because you have a couple of key things that stand out. Boosting the extraction of critical minerals to support the production of electric vehicles. Ben mentions lithium reserves in Sonora and other regions, and we are committed to furthering our efforts in this area. Obviously, Sonora, a region that you’re quite familiar with, as that’s where your project with Silver Viper is.
And perhaps you could give us an update on where we stand. The financing you did recently is closed, and perhaps in particular, you could give an update on that. I know we’re also going to record a short clip, which I will link to at the end of this one, where we go into that a bit more. But people who are watching the silver content today and could perhaps pass along the highlights of where things stand with silver Viper now. Yeah. So I guess one thing you said there about Sonora, and what’s interesting is Sonora, obviously, as a state in Mexico, is.
Is very much known for its open pit deposits. Most of the major mining companies have open pit heap leach operations in the state of Sonora. And the governor of the state is actually in that Marina party with this, and he’s challenging the federal government in court over that banning of open pit minor. I shouldn’t say they haven’t banned it, but just not issuing new permits and challenging the legality of that. Because in this state, mining is the number one industry. And obviously, open pit mining is hugely important to the state as far as their economy. And as these, the existing mines start to run out of reserves and either are producing less or ultimately shut their deposits down, it’s going to have massive, massive issues created, massive issues for that state from, you know, a financial perspective.
So, again, this is a state that’s very well known for open pit mining needs. Open pit mining is very friendly towards open pit mining. It’s just that one level of the federal government where obviously, the federal government can issue, has to issue the permit. And I think we’re going to get back here. Common sense will prevail at some point in the near future, and they will start to issue those new open pit permits. You know, like you said, lithium, a lot of the deposits are in Sonora for lithium as well, and will require open pit permits.
So, again, I mean, that’s. That’s exciting for us. Obviously, we’ve built. Our project is very interesting, and a lot of it should be mined underground. But we also would, you know, ideally start with an open pit deposit to start here at leech and do an open pit he bleach, and then go underground on our high grade structures afterwards. And so we’re going to continue exploring. We’re highly confident that this project, which stands out amongst most of the open pit he bleach undeveloped open pit heap leach deposits in the state. We have a resource that is sitting there at, you know, double to triple the grade of the average open pit he bleached operation in the state.
Again, 60% gold, 40% silver. And the average open pit grade that’s being mined right now is about 0.5 or 0.6 grams gold with very little silver. And we’re at a gram gold, or almost a gram gold, plus another half gram gold equivalent in silver in our deposit on the open pit side. And then we get our big high grade underground potential numbers that aren’t in a resource yet, because we don’t have enough tonnage, but we have lots of targets. We’re going to be drilling the El Molino area. We’re going to be expanding our El Ruby area, following our high grade structure.
And these structures produce kilogram plus silver numbers with high grade gold. We’re going to be testing l ruby at depth to test the theory that we’re onto a large gold carbonate base metal system, and that’ll come at a deeper contact. But similar deposits around the world, you know, they’re multi million ounce gold deposits, and this is all stuff that would be mined underground if it hits and we prove up the theory. So, you know, you can get into these multi million ounce gold deposits with, you know, copper and all those other minerals that you have silver, you know, associated with it down at depth, and.
And that would all be underground. And, you know, obviously would be able to be permitted even under AMLos rules. So, again, we’re onto something really exciting with the project. We’re really excited to start exploring it. We’re expecting a drill program to begin hopefully fairly soon, but later this year. We’ve got all of our permitting in place, our environmental permits through seminar and Mexico to drill all over the project. We’ve got, you know, agreements in place in the L Ruby area with our landowners and everything else. So we got great relations with local communities. We’re ready to go just, you know, kind of watching the market.
We’re continuing to do our exploration around the sector before, you know, around the property while we’re waiting to start that drill program. And then hopefully by the end of the year, we can come out with a resource update as well. Okay. And can you just give an update on where the last financing leaves you? I know there were some people had questions of what that enables you to do and also how that relates in the context of future drilling and what we’re looking at there. Yeah, so, I mean, that because we did a life placement, the funds for that, that gives us over a year runtime of just where we’re doing, you know, kind of what we’re doing right now.
And then we raised about $2.4 million. So we have a bit of money in there for exploration. We probably aren’t running a drill program with that. So there’ll be a follow up placement at some point. There’s also another two and a half million that were owed through our EVA tax in Mexico that at some point we may be able to recover here as well. That would more than finance the drill program. So there’s a lot of money that potentially could come in very soon. And we’ve hired a company to deal with that for us to try and recover that Eva tax that we’ve been holding for years.
And it sounds like people are starting to get that back. So we’re excited about the potential on that as well. So, yeah, I mean, we’re going to be drilling very soon. There may be another small placement at some point, but just to top it up, to run that program. But we’re, if we get that Eva tax, we wouldn’t need that. We could do, you know, a two and a half million would fund, you know, more than a probably a 10,000 metre plus program under if we’re getting those funds back. So very excited about what’s coming. We’re kind of watching the market, seeing what’s happening, but we’re fully expecting to get back to work very shortly with the drill rig.
Well, I know it’ll be good to get back out there, and you’ve been wanting to do that drilling for a while and get to the point where we have the updated resource estimate and hopefully those conditions will fall in place as we’re going forward. And people have questions. You can find out more@silverviperminerals.com. and there is the contact tab in the upper right hand corner, and you can reach Steve or Alicia there to find out more. Although, as I mentioned, we did just record a short video where Steve goes a little bit more in depth into some of the dynamics he just described here.
And to find out more about that, well, just click on the video that’s coming your way now.
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