Transcription
Kitco News on-site coverage of the Rule Symposium natural resource investing is presented by Aerys Mining.
Hey everyone, welcome back to the show. I'm Jeremy Saffron, still live from the Rule Symposium at the beautiful Boca Raton Resort here in Florida. Now, the gold price is obviously one story, but what's actually happening at the order counter, the buying, the selling, the panic is a completely different one, and it's the story that the chart never shows you. My next guest has spent decades on that counter, moving real physical metal. He's Rich Checkin, of course, president, chief operating officer over at Asset Strategies. Rich, always a pleasure.
>> Jeremy. Always a pleasure to be here.
>> Uh, it's been an interesting day because we were just looking at the, you know, the gold price, the silver price before coming to air. It's catching a bit of a bid today. You know, it's had that little bit of a shakeout. We don't need to get into gold price right now from you. I do want to talk to you about the counter because did the audience, you know, did Let's just say gold has had the worst quarter obviously in over a decade, and then turned a little bit more back up. So through all of that, were people panicking? Were they selling? Were they backing up the truck and buying the dip? What did you see?
>> It, I wouldn't say panic.
Um, and they're not ecstatic, that's for sure. Um, take it back one more quarter. Let's go to the first quarter of this year. Talking with our friends in the industry and what we've seen ourselves, for for many, it was probably the best quarter of their careers, right? Um, metals were flying, people were buying, um, and everybody was interested at the highs, 5500, 115 for silver. Um, and then the second quarter comes around and you start to hear crickets again, right? Because we had the war in Iran, the metals pulled back for whatever reason. You could, you know, it could be gold to buy oil. It could be, you know, uh, just people panicking on the pullback, waiting for the dips to finish so they can get in. But in the end, um, people really weren't doing much of anything in the second quarter. Uh, and it's, it's the strangest thing with gold, and I think it happens with other investments as well, but if I wake up in the morning and something's on sale as a consumer, I didn't need it yesterday, I didn't want it yesterday, but I need three of them today, right? The exact opposite happens with gold, right? So, gold goes on sale and everybody stands on the sidelines or they or they divest. Um, and it's the, the weirdest thing. I said that to one of our attendees here at the at the at the booth this morning and he said, "I'm one of those guys, right?" He said, "Uh, I still think it could get down to like 3500, and then I'll get back in, and then I I want, I'm waiting for that." I'm like, "Can I ask you a question? Do you know for sure it's going to get back to 3500?" He's like, "No, I just think it might." I'm like, "Okay, well, what do we know? We know that it's $1,500 cheaper than the all-time highs." Okay, so why don't you act on what you know versus what you hope might happen? Take a little bit of your cash, deploy it, capture that dip, and then go ahead and if it goes deeper and you get what you were looking for, average lower. Um, it seems to be the rational thing to do, but it doesn't seem like people act rationally when gold pulls back. Um, I don't know. It could go further long-term. You know, my thoughts.
>> Yeah, I do. You know, this is why we wanted to have you on. I mean, not many people had this perspective. And I mean, on the ugliest days of that sell-off, which we saw, what did the order flow actually look like? And in your experience, does the retail buyer usually buy fear or do they sell it? They sell it.
>> So, I will tell you, we have a a group of clients that are a core that buy every time you see a dip, right? So they're they're not living paycheck to paycheck. Um, they're not struggling in any one bit. They see the advantage to buy well and they take it every time. We have others that want to do that, but maybe they're they're they're watching things a little more closely. Um, and others that are actually liquidating, some out of need. Um, some may be panic, and some just figured, you know, at these prices, maybe maybe I haven't managed this in a while and I'm overallocated. So I'm just going to divest of some. Right? So, for whatever reason, when we get those liquidation opportunities, uh, we reach out to a list of people that have shown an interest in taking advantage of those and and they dive in with both feet. Okay. Um, so that's where a lot of the business was coming from on on what we call client-to-client uh flips, if you will. Um, for me, it's the best business I can do. I think for any dealer, it's the best business they could do. You get to pay the person who's selling it more than you could if you have to offload it with a a wholesaler. You get to sell it cheaper than you normally could if you had to buy it from a wholesaler. Um, and in the middle, you make more money. Everybody wins. So, we've doing a lot of that type of business in the second quarter. In the first quarter, we had some of that business, but we had just people outright buying. And we're not seeing that in the second quarter.
>> I was going to ask you, I mean, how many people called you up and said, "Listen, man. And I I I I got a margin call. I mean, how many people needed liquidity? Was it I felt like it was more of the sovereign side to pay for oil and watch?
>> That happened on the sovereign side, but let's face it, there there were moments there where the stock markets pulled back as well. And when you have leveraged accounts and you're facing a margin call, you go to where you have liquidity. You and I both know, we've been in this industry a long time. That happens. The two most liquid investments you're going to find in an investor portfolio are gold and silver, and they get sold every time the markets pull back. Yes, that absolutely happened. But we're also seeing selling for need. Um, uh, let's face it, inflation is only, if you believe the official numbers, 4% or whatever the hell it is. Uh, unofficially, it's probably closer to 10. Uh, but the effect of inflation over five, six years just keeps adding and adding and adding. We're probably like 26, 30% higher than we were five, six years ago. People are feeling that effect and they have a need to cash in for some liquidity. These are those financial crises that you don't want, but you you want to be prepared for. I bet they happen. They happen.
>> Uh, okay. Well, let's talk about the kind of tell that never shows up on the price screen. I mean, uh, premiums, the markup over the spot prices usually is actually, I I think get a a coin or bar kind of in your hand. Are are they widening? Are they staying tight right now? What does that spread tell you about the supply?
>> Well, they're still very low, right? And that tells you one thing. This is a hated market, right? So, uh, premiums aren't contracting or small when everybody wants to buy it. That's when the dealers expand those margins because people are going to pay it regardless. That's not happening right now. We're racing down towards smaller margins. Um, for junk silver, you're very familiar with 90% US coins, uh, 64 and earlier. Um, that has been selling retail below spot for months and months. That is not the sign of a market that's overheating. It's a sign of a market that is looking for investors right now. Um, and uh, I think you've got low spot prices, you got low premiums. Um, that is the tell. When you see those premiums contract and stay there, um, it's a buying opportunity. Uh, whether it could go a little lower or not, whatever. Long term, you're going to be just fine.
>> You kind of answered it there on on shortages in silver, but anything you can't get and and is silver tight, you know, getting tighter, faster than gold?
>> Not really. Okay. Um, again, so think about it. When the wholesalers are flushed with something to the point where they're selling it to me, I can take my cut and still sell it to you below the cost of silver. What what happened was at the high points when silver was at 150, when gold was at 5,500, what happened is they took in so much. There were some wholesalers that said, "We're not buying anymore." Which is horrible. But let's face it, they spent all their cash. They needed people to buy, not sell. And as a result, they stopped taking orders. Uh, the good dealers that we deal with never got to that point. We continued to to sell to them, but they are buried in junk silver. They're buried in silver rounds and bars. They're buried in silver eagles and gold eagles. Um, so, uh, the premiums are contracted until they can clear out that inventory and have some cash flow. That's not going to change. And and that is the premium is always your tell.
>> Yeah. Fascinating world of the dealer side. Here's a question. the whole gold market kind of keeps asking, I mean, new faces, we got to talk about it, or we keep hearing that the western retail investor has sat this entire bull market out. Uh, you know, from your perspective, are you seeing new faces?
>> Yeah, so the I won't say they sat the entire bull market out. We started to see the western retail investor enter this market last quarter of last year, okay, maybe even second half. We started seeing signs, but absolutely the last quarter and the first quarter this year. So there were absolutely new faces, and there were also old faces that were new again. So, these are people that um had done significant business with us over time. Uh, we were reaching out just to stay in touch and they say, "Listen, I got enough. I'm not interested. I'm not buying any more ever." Right? Ever.
>> And then they called us up and bought more. Right. So, uh, old faces that are new again. We're we're seeing that. Um, but only when the market is moving upward, when it's listing to port, when it's staying at these lows. Um, people are on the sidelines waiting for it to level out and clearly move up. Um, and again, I don't understand it. Uh, but I know it's true. I've seen it for 30 years now.
>> Jiren, it's an interesting psychological pattern that we get to get to witness here. Rich, uh, quick kind of practical one here because a lot of people watching own zero physical. You know, I got to ask you for somebody who kind of wants to own the real metal but finds the whole thing intimidating, too. And this isn't a pitch for any dealer, but what are the real pitfalls? And you know the mistakes?
>> We may have talked about this in the past, but World Gold Council did a survey, right? And they said, you know, they looked at all these investors and they said, "Do you believe you ought to have gold in your portfolio?" It was overwhelming. Like 75, 80% said, "Yes, you should have gold in your portfolio." You and I both know the numbers. We're nowhere near that. It's like 1 and a half to 2% saturation or something like that. It's nothing like 80%. Um, so the next question was, "Well, why don't you have it in your portfolio?" Because I know you don't, right? And they said two reasons. One, I can't trust precious metals dealers, which is unfortunately a reputational issue that is earned in our industry. There are bad players. Uh, and two, they don't know how to get started, which is just an educational issue. Call a dealer, they will walk you through it. It's not that difficult. So, that part is simple. The reputational issue is you got to protect yourself by doing certain things. The biggest one I can tell you, I've shared it before. If you're looking to buy precious metals, um, before you buy from anybody, the first question you should ask them before you agree to a deal is, when I am ready to sell, will you buy it back? Okay? You'll be surprised how many dealers out there do not buy back. And they'll give you all sorts of a song and dance about, well, you could do better at auction or private sale. You don't need me to do that. It's all garbage, Jeremy. I'm telling you, they're lying through their teeth. They're doing a tap dance. They don't buy back because they charged you way too much going in and they don't want to expose the huge margins, the unreasonable margins that they charged you. They're bad dealers, right? So, the the goodby people, the respectable people, everyone that I know makes a two-way market cuz they make a profit. It's a business. Nobody begrudges that, but it's a reasonable one. So, if they don't buy back, don't walk away. Run. Don't buy anything from them.
>> It's a good point. That's why we get rich on this show. Uh, okay. I got to ask you too, uh, what do you think is the single biggest myth about owning physical gold that you kind of want to bust for people here?
>> I I would just say, uh, simply that it's hard to do. It's difficult. Um, there's nothing easier. I mean, you you know, you've bought before. You call up a dealer. You can fix a price right over the phone. You send them the funds. It clears the funds and they send you the medal. It is not hard. Um, people haven't done it. There's always that fear of the unknown. Um, but uh, people have this myth that it's just such a difficult process. It's like the easiest thing on earth. You know, it's easier sometimes than going to Amazon, for God's sakes.
>> Yeah. Yeah. Hey, you've said across the counter for many, many years. You've seen this. You've seen every panic. You've almost seen every mania as well. I mean, yeah, you have. After these years, what's the single tell? Not the gold price. Um, something else that kind of tells you where the market is right now.
>> Uh, for us, it's just talking to clients. I mean, you can you can, if you do business kneecap to kneecap, right? People will tell you exactly what's on their mind. Um, if you're making a sales call and they're they're busy, they're just going to get rid of you. Sorry, not now. Whatever. But if you have a conversation with somebody, you treat them well over time. Um, they will share what's going on. And you know, the clients have real fears. They have real desires, they have real passions, and they all come out when you have those conversations. Um, you and I both know that precious metals uh should be the cornerstone of a portfolio. Um, they they hold value. They increase overall performance uh for the portfolio. They decrease overall risk if you hold just a small amount. Everybody should have it. Not everybody does, but if you take care of clients um over time, uh, they'll all come around and do the right thing.
>> Yeah, well said. And you brought up a good point. Always liquid, too.
>> It's the most liquid asset on Earth. Um, I I kind of like it to real estate. I I love when working with folks that are into real estate because they understand the concept of real tangible assets. They're not making any more dirt. They're not making any more gold. Okay. The biggest difference between the two is gold is a hell of a lot more liquid and you don't need all these other players involved to get a transaction done. You can just make it happen.
>> Yeah. All right. Rich Checkin, of course, Asset Strategies International. We appreciate your time as always and your truthful take.
>> Anytime. All right. Appreciate that.
>> All right. That was Rich Checkin of Asset Strategies International. Now, here's the takeaway. The price on your screen is only half of the picture. What people actually do with their own money, whether they buy the fear or sell it. That's the other half, but it usually tells you more. Now, we're going to have some great content all week here at the Rule Symposium in Boca Raton. I'm Jeremy Sappin for Kitco News. We'll see you next time.
Kitco News on-site coverage of the Rule Symposium natural resource investing is presented by Aerys Mining.