David Erfle (Junior Miner Junky) On the Monthly Close, the Silver Performance, and Looking Forward to Beaver Creek Precious Metals Summit

Trevor Hall And back for his curtain call here on mining stock daily is a good friend of ours that's David earthly the junior miner junkie. David thank you for joining us once again on the show. How are you doing.

David Erfle Great. Trevor any time always love talking.

Trevor Hall Hey I just want to preface this conversation we are recording Wednesday evening and the this interview will be published Friday morning so whatever happens between now and then we have no control over so hopefully that what we're about to talk about still will hold some relevancy over the next 36 hours David. But the way things are the way things have been going the last few weeks it seems like things are in a good spot and I feel pretty comfortable with that timeline. I want to talk to you first about gold. It seems like gold this week has been trading between that $1525 and $1545 dollar range. There seems to be a big resistance level there, historic resistance, up from about six or seven years ago. Can you provide us some commentary on that resistance level and what this price action a range price action is telling you?

David Erfle Sure. Yeah I recall vividly during the bull run of the last decade up into 2011 that when it began to correct after 2011, $1550 was really strong support for a few years. And then once it broke that support that was all she wrote. And the bear market was ushered in 2000 and in early 2013. So that's the reason why you see it why you're seeing this resistance here. And also it is extreme overbought but it can remain extreme overbought for longer than many people realize because it broke out of a six year base accumulated base. So there's a lot of power there that's built up in this move so and also what's happened this week. Well it started last week was this silver began to leave gold again and the miners are still being bought on weakness. So that's a powerful combination for this move to continue after this consolidation process is over about 15.

Trevor Hall Yeah it has been pretty interesting to watch I know with a number of companies that I follow and invest and it does seem like a lot of those miners were moving kind of contradicting themselves and movement as as gold or silver didn't necessarily move higher. Kind of stayed flat. Miners still started picking up momentum in their share price so I would say to me just as you know as a spectator there seems like that is a very bullish sign for the miners.

David Erfle Yes it always has been. Historically it has been. You know when when the GDX first hit 30 the miners began to lead gold lower. And if you take a look at daily chart of the GDP ex you bring it up here. You had the the RSI up at 50. That's a really strong line of support. And also the 18 day moving average. And last week we had we saw the GDP ex gap below that 18 day moving average while the relative strength index was was bottoming at 50 and it was a little bear trap. And the next day it gapped up over it leaving a wild virtual daily chart. So as long as the GDP x remains above 50 and then the daily Relative Strength Index and it's it's rising 18 day moving average I expect this once this consolidates consolidation is finished. That GDX could run up to the $34- $35 area and that would be significant because $30- $31 areas strong resistance which is where the ETF ran to and that quick 2016 run up. So it's consolidating underneath there and it's the gold while the gold price is consolidating underneath 50/50.

Trevor Hall I want to ask you about the consolidation in the gold price and none after the consolidation but the correction for a better term because you know in the last few weeks you and a lot of other gold analysts out there have explicitly expressed the need for a healthy correction down to almost what I think $1480 was a number that has been thrown out there. Right. And I think it was last week I think was maybe Monday or Tuesday. There was a big sell off in gold and we actually closed below $1500 and was like oh maybe this is it. Maybe this is when that correction is going to happen. But I tell you David the next day I wake up gold's back up to like $1520. So I was thinking to myself like what was that the correction or do we need something more than that?

David Erfle Well first off I think you're. You're talking about a spot price right. I follow the futures price and the futures price has not closed below fifteen hundred. This consolidation we've seen we've seen the price go below fifteen hundred a few weeks ago but it never closed below $1500. And if you bring up a chart a daily chart of gold the 18 day moving average has held in this during this entire gold run up since it broke out in June. So I expect the market now is pricing in a 15 fifteen hundred dollar floor. And while it's pricing in this fifteen hundred dollar floor a lot of these juniors with debt that have very attractive projects in safe jurisdictions are getting financed and once they're getting finance their share prices are are are popping. So this is the difference between financings in a bear market and in a bull market during the bear market finance dilutive financings were being sold but during this bull market a lot of these juniors who've been holding down dilution just waiting for capital markets to improve to get a financing their share prices are appreciating on on financings with good terms.

Trevor Hall Now I remember it wasn't too long ago we were talking about how thankful we were for that fourteen hundred dollar floor and that wasn't right. It was maybe a month ago I think that was a big deal and fifteen hundred looks just as viable now as fourteen hundred dollars did then. David I want to move on to silver because this week silver definitely has outperformed gold it almost seems like it's silver is kind of holding up gold by the bootstraps a little bit. And you were kind of chatting a little bit with me before we pressed record about the technical bull market in silver. We're technically going to be there you know today on Friday and if we close above a certain point which we look like it's going to happen.

David Erfle Right. Yes. I've been saying for the past month or so that I'd like to see a monthly close above $17.50 in August and then once that takes place silver will technically join Gold and a new bull market. And it looks like that's going to happen. If you take a look at the gold silver ratio which is what Which what. Which is what began this move when it hit when it reached 96 on a weekly basis. We hadn't seen gold silver ratio meaning it takes 96 ounces of silver to purchase one ounce of gold since the financial crisis of 2008 when it hit ninety three. And when it spiked above 93 during that financial crisis silver bottomed at a $8.40 on the same day. And then after that bottom at $8.40 in that peak over and over 93 and the gold silver ratio silver proceeded to move up nearly 500 percent in 30 months from $8.40 to nearly $50 an ounce. So this gold silver ratio is really something to watch when it reaches extreme levels of both on the downside and the upside. Now it's it's down to speak and on Wednesday it's down below 84. And it's going in the right direction which is down. So once it gets below 80 that will be very bullish for the entire precious metals complex and I expect silver to begin to play catch up quickly here.

Trevor Hall And you've kind of been picking up the trend on putting some money behind some silver players. According to the newsletter, I'm a subscriber to the newsletter and a lot of value is what you write but can you provide a little bit of ideas of what is now a good time to really allocate some capital to some of those lesser known exploration junior plays or are you still kind of on the sidelines waiting to see how this plays out in the next week.

David Erfle Well I set out as you know an alert to subscribers yesterday on a one more silver developer Explorer that I like. All I was already fully invested in it a few silver juniors for the past few months. Expecting this move to happen but I'm pretty much done. I wanted to add one more and I was kind of waiting for the for the proverbial gentlemen's entry ticket to get it a little cheaper hoping that it would correct a bit more. But once silver began to outperform gold again last week I basically said to myself and my subscribers now's the time now is the time to add another one if you're so inclined. If the particular Junior you're about to buy is not extreme overbought which this one was. 

Trevor Hall So there's a number of silver stories out there you know and I can think of three right off the top of my head. I mean we have Alexco waiting for their plan B water permit and hopefully that should be coming here before the end of the year and a construction development decision coming down. We have Americas Silver it seems like they have been keeping their high grade silver in the ground waiting for better silver prices and financing their company based on the base metal. They took a little bit of a hit from their financials last week. And SilverCrest and the last cheapest mine in Mexico just keeps on delivering in their exploration of these all these stories, do you kind of feel like there's going to come a tailwind for all of these stories really picked up and they just go. And then you have all these companies kind of kind of hitting the top of their their share price here is that all at the same time.

David Erfle Not all at the same time but a few of them already have like you mentioned Alexco which which you know I've I've been a shareholder for quite some time and recommend to my subscribers. It's trading at a multi-year high right now although the silver price has yet to reach the 21 level where it reached in 2016. So these silver juniors had been leading silver higher. You know this is what happens in the beginnings of a new bull market. You have the gold price bottoms first. And the seniors begin to get bids and the royalty plays and then. And then the juniors further on down the line again to get bids. But this is silver miners and the gold miners usually bottom at the same time and they did it this time this time as well. Even though Silver did not take off until later. So when you see the silver miners bottoming with the gold miners at the same time then you know that the silver price is not far behind.

Trevor Hall I want to talk to you about this monthly close we have this week know because Monday is a holiday here in the States. Friday is technically the monthly closed. What are some of the key numbers you're looking at in gold and silver that you're really going to be paying attention come the end of market close on Friday.

David Erfle Well that's that. That's 1750 level which I believe is already in the bag on Silber and I would like to see gold close above 750 Dec gold close above fifteen fifty on the monthly as well. That would be that would be really that would be very bullish going into September. But I expect once this move finally does have a sustained correction I think the move will end with an intraday reversal on big volume and it will be very sharp. That's the way these things usually end when they're overextended and this move is really overextended. So once that does take place I don't expect the correction to last very long. I mean we're basically in a perfect storm here for gold and now silver. You know we've got these central banks that are dead or are continually destroying their currencies. And you've got now and just a few weeks ago it was $15-trillion dollars of debt with negative yield. Now it's up to $17-trillion just a few weeks later. And then you've got the Hong Kong situation where China's about to send troops in there any day and escalate that situation. And it's the EU situation just keeps getting worse. Looks like it's going to be hard Brexit. I mean the the the reasons go on and on and for a perfect storm here for precious metals. And also you've got the U.S. equity markets now are forming a bearish flag on on the big board indexes. So as long as Powell keeps cowtowing to to Trump and lowering interest rates you know investors are going to are going to get a feel that there's something wrong with with the economy so they're going to sell the stock market. You know they're going to sell  general equities. I don't expect a crash though because if there was a crash that mean all means all that capital will have to go somewhere else. I don't see anywhere else it could go. Bond market? No I don't think so. Gold. No it's not big enough. A lot of it's going to go into the dollar. So I think you're going to continue to see that the U.S. dollar go higher you're going to continue to see precious metals go higher with the dollar. And once the U.S. stock market corrects I think safe haven capital will go into U.S. blue chip equities that a strong dividend as well and it's definitely some to look forward to I think a lot of people would just kind of wrapped up and where's the actual equities market heading in the very near term.

Trevor Hall That's about the first idea thought about of as far as recovery goes into the overall general equity market. So something to think about for everybody out there listening. You know there's always you always want to think about well what's the next play right.? And you know you never knew never too many steps forward in your right of thought in your progress. So good food for thought there. I want to ask you about if we do see this continued move in in precious metal and in miners you know we're chatting a little bit as far as speculation investing in junior exploration plays. Are we now able to take on more risks where we can feel a little bit more confident putting money behind companies now that we wouldn't have been say six months ago?

David Erfle Well that's that's a difficult question. It all depends on what your what your category of more risk is. If you mean more early stage exploration plays as far as more risk is concerned. I think you could you know as long as you have of serially successful management team that is controlling a high grade project contained in a district scale land package in a safe jurisdiction and the share structure is tight you know that's that has been a safe speculation to put a small amount of capital. But as far as more risk is concerned as far as the majors and royalty plays I don't think so because the move is overextended in those issues. So I would look more down the food chain to things that maybe if you're thinking about optionality plays meaning if you have your eye on some things that maybe need fifteen hundred dollar floor for the gold for to be economic for the gold price that looks like that management has done a good job of keeping the share structure tight while they're waiting for capital markets to loosen up. Sure you might want to take some risk at something like that but not too much. But as far as looking down the road is concerned that you mentioned before you ask the question. I'm looking down the road to base metals because they're getting hammered. I mean if you take a look if you take a look at the copper chart and the zinc chart they're both hoarding some long term very ugly head and shoulders patterns. And if copper loses $2.50 there's not a whole lot of support until $2.20. And if zinc loses a dollar it's about a $1.03 Right now there's not a whole lot of support down to $.80. And the copper and zinc juniors just been getting hammered. So I think there's going to be opportunities in base metal plays heading into tax losses and I wouldn't be surprised if a lot of investors right now are selling early for tax loss on those issues and putting them into precious metal.

Trevor Hall Well last year we thought tax last season started about a month earlier. Do you think this year we could see. See that happening even earlier?

David Erfle For base metals. And also uranium as well uranium shares getting hammered because of that that Section 232 decision. So if you're if you're if you're thinking about dipping a toe back into uranium stocks good time to do that would be November because historically uranium stocks tend to bottom in November. There's also another big decision coming up in Uranium. I think it's in the middle of October. You know that's the ultimate contrarian playwright. Uranium stocks and base metals stocks now.

Trevor Hall Unfortunately it seems like it's been the ultimate contrarian play for about three years.

David Erfle I lost count of how many.

Trevor Hall I don't mean that you know to bash anything I mean I like uranium plays but it just seems like it's been a really long really long bear market for that sector.

Trevor Hall David I want to bring up one thing in a few weeks you and I are both going to be travelling to Beaver Creek Colorado for the Beaver Creek Precious Metals Summit. I remember vividly you kind of showing me and show me a little bit of how you operate in allowing me to kind of kind of watch you perform with some of your interviews and wonder ones you had last year always you know never take that for granted. Thank you for that opportunity. This year's a little bit different story. We've got a different market. We've got a lot of big money that seems to be going there to decide what to do with this newfound bull market in the precious metals What are some of the things you are going to be looking at and wanting to ask these companies as you head into the Beaver Creek precious metals summit.

David Erfle Yes it's my favorite conference to it's I've I've been going for about five years now and this is the first time that I've that I'll be going to this conference. What we're going to be in a bull market. So the conversations are going to be quite different. You know we're usually discussing how much cash we're we're we're we're building up to possibly scale into tax loss season deals in December. That's usually what the conversations revolve around. But this year like you said it's going to be quite different but I'm going to be looking at the big thing I'm going to be looking for is this is both the Beaver Creek summit and Denver Gold Forum are the first major conferences after a lot of these guys are coming back from some great summer vacations. So I expect like last year I think we saw we saw the we saw the Barrick Randgold deal come out of these conferences. I expect another high profile merger and acquisition type out of these conferences. At least one maybe two and this will kick off the next round of M&A and in the space because these guys are are getting nervous watching the gold price go up so much and and realizing that hey we've got to get on all year and replace these ounces. So I expect to see at least one high profile merger or acquisition this fall.

Trevor Hall If you remember last year that's all I remember when it was announced that Persian gold was not going to be attending the Beaver Creek precious metals summit. And then the week following it announced that America's silver had bought them and acquired them. So you never know it could happen and it seems like that M&A space. I don't think it's been as frequent as what we were expecting this year and maybe maybe I'm wrong in thinking about them mentality. But I think last year was like oh there's going to be more M&A because it's a new it's a it's a new market but it still doesn't feel like it's quite really heated up as much as people were predicting.

David Erfle No no it hasn't. I mean that's just it's basically that many of these guys there they still don't believe this move is for real. You know they got burned in 2016. You know the capital markets opened up the open the spigots wide in 2016. I mean they fund it. They financed everything and got burned. So now they're sitting back on their heels and wait for at least I believe from for from a lot of people that I talked to in the industry that they're waiting for at least two quarters of gold to remain about fourteen hundred before they really start to open up the purse bring first brings again. So although we're seeing a lot of very good deals being financed we're still we're we're still not. I mean a lot of good projects you know high margin projects being financed but we're still not seeing you know the let's throw money at everything financing way that we saw in 2016.

Trevor Hall Could some of it be the be that the majors have learned from some of those mistakes of the past? .

David Erfle Absolutely. Yeah absolutely. That's That a big that's a big reason. And also let's be let's face it you know a lot of these guys are still on summer holidays. You know this move has taken a lot of people by surprise. You know this is summer doldrums is usually that is usually the buzz word for precious metals during you know July and August. You know this is this has caught a lot of people by surprise. So it's going to but I think September is going to really be more interesting and volatile because all these guys are going to be coming back their vacations and we might have a gold price that's knocking on $1600 on sixteen hundred.

Trevor Hall Well let's let's hope for that and I look forward to catching up with you and doing a quick. Well if we're doing a quick recap of Beavercreek for you and listeners here on Mining Stock Daily thank you so much, David. Real quick before we end the conversation let us know how we can reach you.

David Erfle Oh sure it's. I have a I have a Web site, junior miner junkie with a "Y" dot com and I also write a weekly column for Kitco that comes out every Friday. You could find that on Kitco dot com.

Trevor Hall Thank you David appreciate you and appreciate your time and we'll see you back here in Colorado in a couple of weeks.

David Erfle Looking forward to it. Thanks a lot Trevor.