Maurice Jackson: Joining us for a conversation is Mickey Fulp, the world-renowned Mercenary Geologist.
It's always a pleasure to speak with you, sir. I hope that life has been treating you well and that your family is in good health.
Mickey Fulp: Absolutely.
Maurice Jackson: Mickey, the Biden administration has announced the Green New Deal and speculators are anxious to find out, where do you see the next big opportunity and/or opportunities? Let's get your thoughts on precious metals first, beginning with gold.
Mickey Fulp: Well, in my opinion, the Green New Deal will have absolutely no effect either way on gold. This program is going nowhere other than by executive order and the Biden administration and most of those executive orders will be challenged in court. Is gold a buying opportunity at these prices? I think it's always smart to buy gold on dips. But from the charts we’ve been analyzing, the case can be made that the bull run for gold is over.
If you look at the charts from 2010 to 2011 for gold, and 2019 to 2020 two-year charts, overlay them, normalize them, they are remarkably similar. So if the past is prologue, the case can be made, and bear in mind I'm not making this case, I'm just saying it's possible that what happened to gold from September 2011 until basically the end of the first quarter in 2016, looks very similar to what is going on right now. In that case, what would it be a four-and-a-half-year period of lower lows and lower highs? If you look at the six-plus month chart of gold, since the high was hit on August 6th to $2,063 an ounce, it has made lower lows and lower highs since then, just saying, mate.
Maurice Jackson: Silver has gained a lot of attention at the moment. Do you believe that this is a head fake or is the attention warranted for silver speculators?
Mickey Fulp: Well, as you're aware, I have no belief. I've spoken about that and I think you were in the audience when I gave that speech at the Capitalism and Morality seminar. But once again, let's look at the historical charts and let's take a really broad view here. Silver prices have shown classic speculative cycles over the last 51 years with two major exponential rises, parabolic tops, and parabolic falls, and three minor occurrences. It looks to me at this stage that we are set for another exponential rise. We've already seen that to some degree for silver, but if that happens, it will reach a parabolic top and undergo a severe parabolic fall. This is the way markets work, especially small illiquid volatile markets like we have in silver, where derivatives, futures, options, ETFs have great control over the price of the metal.
Maurice Jackson: Give us your thoughts on the latest moves on SLV and its impact on the price of silver. Is this going to be the catalyst that breaks silver out to new highs?
Mickey Fulp: Well, I don't, I'm not sure what it's supposed to break, but you know, when you're attacking SLV, you're attacking an entity that does not exist, it's a derivative. In other words, it supposedly holds silver, but you can't redeem your silver, if memory serves, from SLV, you can redeem the value of your silver and in a currency. Anybody that's going to pull a short squeeze on silver and try to break the bank is coming up against number one, JPMorgan and Goldman Sachs, the biggest banks in the world, and it's an order, two orders of magnitude, more problematic to do something like that than it was to run a short squeeze through Reddit on GameStop. So don't think it's going to happen.
Maurice Jackson: Let's discuss my favorite metal and probably your favorite metal, which is platinum, which is quietly had a nice run the past couple of months. What's going on there?
Mickey Fulp: Well, there are lots of things going on, and you're right, it's my favorite metal for 2021. In fact, and the first week of January, I came out and said on a couple of podcasts that platinum would be the best performing precious metal in 2021. And that's proven true so far, it's up almost 20% year today. Gold's down, palladium's down and silver's had a nominal rise around 3%. This has a lot to do with the idea, once again, that past is prologue, and it has a lot to do with a very depressed platinum price for about the last four to five years.
The fundamentals of platinum are very strong. There will be a deficit in 2021, a significant deficit, because of a supply disruption. It was in surplus for the last three years. It was in a little bit of a deficit in 2020. Andy Schectman, the president of Miles Franklin, he and I are in strong agreement that you look at ratios and if you look at the platinum and gold ratio, it's way out of whack; it's about something on the order of 0.7 right now, historically the mean and median are around 1.3. It is on the rise over the last two or three months.
And if you look at the platinum to palladium ratio, it's even more striking. It's currently in the mid-0.5 range, say 0.55, 0.56. But the mean and the median over once again, 51 years is 3.0. So when we see this sort of skewed markets, they will normalize at some point. So it's pretty easy to call platinum for me, very bullish going forward. I can't tell you how long it's going to take, but at some point, these ratios will normalize so that makes platinum a very strong buy, physical platinum at this juncture, in my opinion.
Maurice Jackson: How about palladium? Do you see it as a buy or a sell?
Mickey Fulp: I don't see any value proposition in palladium at all. Especially considering the current price. Number one, it is a precious metal in price only, 95% of the palladium demand in the world is industrial as opposed to about 60% for platinum, 60% for silver, 15% of gold is used for industrial purposes. So in my opinion, palladium is not a precious metal and almost all the demand is for catalytic converters and catalysts and the petroleum industry.
And the other thing about it, I mean, you deal in coins for Miles Franklin, and it's not that attractive a metal when you come right down to it, especially when you consider how beautiful a Gold Kangaroo is or a Gold American Eagle, Silver coins are beautiful; you just got to keep them stored properly so they don't tarnish and arguably I think the most beautiful coins on the face of the earth, are Platinum Vienna Philharmonics. So, the jewelry, the hoarding of palladium coins is minuscule compared to the other three precious metals. And it's only used for jewelry when the price was low because poor Chinese people could afford to have a palladium ring, a wedding ring made and so no value proposition at these sorts of prices.
Maurice Jackson: Readers that overlooked the Platinum Group Elements, allow me to remind you that we called rhodium a buy back—it was July 2017—at $870 and the current price for rhodium is $26,000.
Mickey Fulp: Nice call, mate! Now here's a very good example of low liquidity, small volume market. It's very hard to buy rhodium compared to other precious metals. For the longest time, you could only buy rhodium sponge. It's is a very rare element that is only used industrially, to my knowledge, as a minor component, as a catalyst in various applications, but mainly as catalytic converters for internal combustion engines. I don't think that one would buy rhodium to hoard it. It is pure speculation so, you made a very good trade there and I certainly hope that you've taken profits on this trade.
Maurice Jackson: I have to share with you that I feel that platinum has a very similar value proposition. I'd be lying to anyone if I said that I knew that the price of rhodium was going to go to $23,000 but I know it was on sale. And I feel the same way about platinum right now. I can't forecast the price, that'd be disingenuous, but I believe that platinum is going to go to higher numbers and that's why I've been a big buyer of platinum. In regards rhodium, they do come in one-ounce bars.
Switching gears, I'm curious to hear your perspective on what type of impact the Green New Deal will have on the often overlooked base metals. Beginning with copper.
Mickey Fulp: No impact other than speculation, these Green New Deal is going nowhere. And even if it were implemented, the cost would be ridiculous. The idea that copper is going to be driven by some sort of worldwide green agenda is ludicrous. If you look at the best most positive projections of electric vehicle use and electrification, the green agenda could increase in the next decade the use of copper by about 500,000 tons over 10 years. Well, look at the compound average growth rate of copper since 1900, at 3.2% per year. This is a minuscule add-on. We use 25 million tons of copper right now, in a decade, we will use a significantly more amount of copper and I just don't get this. This is promotional by companies that produce copper or hope to produce cobalt or vanadium or lithium or nickel.
These are very small add-ons. The copper market is growing. It has been a winner already. That's mainly because of low inventories, supply disruption with mines shutting down supply, or demand disruptions with the world economy temporarily shutting down. We'll see where it goes from here and the dearth of major copper projects on the horizon. So copper is going to do well. Copper at $4.04 has gotten way ahead of itself. It is badly in need of correction. We've already talked a bit about how markets go exponential, reach parabolic tops and come back down the other side. Copper's well set up to do that right now. I'm not going to say it's not going higher, I hope it goes higher because it helps my copper stocks. But as you can tell, I don't think very highly of the prospects of the green deal.
Maurice Jackson: Based on your response, it sounds like you and I are probably in agreement that if we're going to see a move in the base metals, it's going to be organically just based on the supply and demand fundamentals.
Mickey Fulp: Absolutely. And it goes further than copper, we've seen nickel go up quite a bit. So $8.62 at market close on Friday. This is driven by steel demand from China. The incremental increase of nickel and lithium-ion batteries is nickel sulfate is so small as to be, maybe it could account for the entire usage of nickel outside the steel industry, 3% to 4% per year in batteries at all. Nickel is and will continue to be driven by the health of the world's economy and stainless steel demand, especially in China.
Maurice Jackson: How about the other yellow metal and that is uranium?
Mickey Fulp: Well, it's quite amazing what's been going on right now. There is an oversupply of uranium. We've seen that with a price decreasing from about $34 a pound in April to $28.50 today. Yet uranium stocks have been on quite a run over the last two or three months. One thing that is encouraging is that the Democratic platform, which came out last year, for the first time since 1972, took a positive view of nuclear energy. So certainly, if they let's say are going to try to kill the fossil fuel industry in the United States, the only solution for baseload electricity is nuclear energy. And we very much saw that come to bear in Texas over the last week. The problem with renewable energy is, the sun doesn't shine for at least 12 hours a day, and the wind doesn't blow, and knowing that, windmills freeze up. So like Don Quixote, let them go chasing their windmills.
Maurice Jackson: What is often overlooked is that the energy sources targeted by the Green New Deal are intermittent energy sources, as you referenced, and we're just not there right now to make that transition.
Mickey Fulp: Well, I think we're agreed. We need a mix and when governments, regions, provinces, we've seen the same thing happen. And in South Australia, over the last few years, we saw it happen in California, this summer with wildfires and no baseload electricity because they've converted to the wind and solar so rapidly. So until there are ways to secure energy, efficient ways to store energy, wind and solar have to be a minor part of the whole equation. Otherwise, you end up like South Australia, California. or Texas this past week.
Maurice Jackson: Mickey, you have four decades of experience. For someone new to the natural resource space, should they procure physical precious metals first or resource stocks?
Mickey Fulp: Well, let me step back and say that there is no reason to conflate the owning of precious metals, especially gold, which serves not as an investment, not as a speculation, but a preservation of wealth and a safe haven insurance policy during times of economic difficulty or, heaven forbid, collapse. Resource stocks are just pure speculation. You're speculating that whoever you're buying their stock, that they are going to do well, either margin and as a miner and a producer or pure speculation, often driven by higher metal prices in the junior exploration space. So, you know, it's up to each speculator or investor, but I want to always have at least 10% of my net wealth in physical gold in my physical possession.
Maurice Jackson: And just for the record, which physical, precious metals are you buying right now?
Mickey Fulp: I'm buying platinum. I bought platinum last year, about $800.
Maurice Jackson: Smart move.
Mickey Fulp: Platinum at $1266 now, so I'm not interested in buying any metals on the uptick. Recently, I bought some very fine Australian Kangaroos from your buddy, Andy at Miles Franklin. So I bought those on a dip in the price this year.
Maurice Jackson: Do you have any resource stocks that you'd like to share with us that have your attention right now?
Mickey Fulp: Sure. One thing I've noticed in the copper space that the miners have made a big run, but the advanced explorer-developers have lagged. So my favorite copper stock is Trilogy Metals Inc. (TMQ:NYSE.MKT; TMQ:TSX) on the New York American exchange and the Toronto Big Board, hardly trades in Toronto. So you would want to do any trading of that stock in New York, two high-grade giant undeveloped copper deposits and Alaska permitting proceeding on time and financing pending. I liked that stock, I own it, it sponsored my website.
And then I'll give you one in the gold space, as you're aware. My favorite gold province on the planet is Nevada. And I like Allegiant Gold Ltd. (AUAU:TSX.V; AUXXF:OTCQX). I own that stock. And once again, it a sponsor of my website, it's a hybrid prospect generator drilling. Now at its Eastside project in south-central Nevada, we're convinced that the resource there is going to be much larger, currently at 1.1 million ounces, hard to say, but my target level is around 2 million ounces after all this has been completed and it's a hybrid prospect generator. So its goal and it's currently meeting that goal is to pay for all of its General and Administrative costs through option payments, to projects at joint ventures, for exploration by other juniors.
Maurice Jackson: In closing, sir, what keeps you up at night that we don't know about?
Mickey Fulp: That's personal information, I'm not going to tell you that mate. I'll take the fifth on that. Okay.
Maurice Jackson: Yeah, you gave me a hard time last time as well, but I always have to ask.
Mickey Fulp: Well, if you keep asking am going to keep skirting the question.
Maurice Jackson: All right. Last question, sir. And that is what did I forget to ask?
Mickey Fulp: I have no idea. We covered it all today.
Maurice Jackson: Mickey, where can readers find your work?
Mickey Fulp: Mercenarygeologist.com, I run a free subscription service, sponsor model, sign up to get my stock picks and my musings on time delivered to your mailbox. And also via Twitter @mercenarygeo very active. You can find out what interests me on a daily basis and we have 49,800 Twitter followers and we've been stable after Twitter started carving about a thousand off since the first of the year, we stabilized. So I guess I had a few followers that they did not like. Jack the hack did not like.
Maurice Jackson: Well, Mr. Fulp, it's always a pleasure to speak with you, wishing you the absolute best, sir.
Mickey Fulp: Thanks a lot, Maurice. It's always my pleasure.
Maurice Jackson: Before you make your next precious metals purchase make sure you contact me. I’m a licensed representative to buy and sell physical precious metals through Miles Franklin Precious Metals Investments where we have several options to expand your precious metals portfolio from physical delivery of gold, silver, platinum, palladium, and rhodium directly to your home or office, to Offshore Depositories and Precious Metal IRAs. Call me directly at 855.505.1900 or email: [email protected]. Finally, please subscribe to Proven and Probable, where we provide Mining Insights and Bullion Sales. Subscription is free.
Maurice Jackson is the founder of Proven and Probable, a site that aims to enrich its subscribers through education in precious metals and junior mining companies that will enrich the world.[NLINSERT]
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2) Mickey Fulp: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Trilogy Metals and Allegiant Gold. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: Trilogy Metals and Allegiant Gold are website sponsors.
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