As Silver Prepares To Take Out $30, Here Is Why Eric Sprott Believes The Metal Is Going Much Higher

Tyler Durden's picture

As silver attempts to break $30/oz yet again after the LBMA woke up and rejected an earlier attempt to take out the critical barrier, it is appropriate to present the most recent interview with Eric Sprott (by the Globe and Mail): the man who one of few, and very much against the conventional wisdom grain, called the move in precious metals many years ago, and so far, has been spot on. The summary on why the much maligned PM bubble is not even close yet: "I think gold is the reserve currency today. There is not a currency in
the world that it hasn’t appreciated against by at least 300 per cent.
And it has beaten every stock market. You can’t even rent a safety
deposit box in Germany because they are all full of gold and silver … I
am pretty convinced that gold will go a lot higher because it is
under-owned as only 1 per cent of people’s money is in it. It could go
to $2,000 an ounce. I could imagine it at $5,000. I am not giving a time
frame on that, but I could certainly see that happening. But the real
story now is silver." And on silver: "Gold has traded at a ratio of 16-to-1 to silver in terms of price, but
today it trades in the range of 50 to 1. I think the gold-to-silver
ratio is going to go back to 16 to 1 given the passage of time, say
three to five years. And I bet you that silver overshoots. The
gold-to-silver ratio may even get down to 10 to 1. I believe that the
price of silver has been suppressed."

Key excerpts from the interview:

Why did you become bearish just before the Nasdaq stock market imploded in 2000?

We had an 18-year bull market from 1982 to 2000. This is about the
average length. You could tell from the almost insanity of the market at
the time that it had to be over … We were valuing stocks at 100 times
sales in the Internet boom. It was ridiculous.

How long do you expect a bear market will last?

I have always thought it would be a long bear market – about 15 to 18
years. It started in 2000, but it might even be longer this time because
the powers-that-be keep manipulating the financial market. Having a
zero interest rate policy is manipulation. Having quantitative easing is
manipulation of what the market would otherwise do. …They are delaying
the liquidation phase of a bear market. Almost all governments keep
bailing out their financial systems.

You have been a bull on gold from the get-go. Is its price over $1,350 (U.S.) unfolding as you expected?

It’s been the investment of the decade. When I bought gold, I was buying
gold to hold [as a long-term investment]. As it turned out, it
quintupled. I didn’t think it would go that far because no none would
have imagined that the central banks and governments would get
themselves in a position where they are printing money.

The printing of money makes gold more valuable. You don’t have to be a
genius to figure this out. The Johnny-come-latelies – the Paulsons,
Einhorns and Soros – all figured out, when [the Fed announced the first
round of quantitative easing], that they should own gold. It becomes
more obvious every day as you see these financial challenges that we
have in Europe.

How high will gold go?

I think gold is the reserve currency today. There is not a currency in
the world that it hasn’t appreciated against by at least 300 per cent.
And it has beaten every stock market. You can’t even rent a safety
deposit box in Germany because they are all full of gold and silver … I
am pretty convinced that gold will go a lot higher because it is
under-owned as only 1 per cent of people’s money is in it. It could go
to $2,000 an ounce. I could imagine it at $5,000. I am not giving a time
frame on that, but I could certainly see that happening. But the real
story now is silver (SI-FT29.750.481.65%).

Why are you more bullish on that metal?

Gold has traded at a ratio of 16-to-1 to silver in terms of price, but
today it trades in the range of 50 to 1. I think the gold-to-silver
ratio is going to go back to 16 to 1 given the passage of time, say
three to five years. And I bet you that silver overshoots. The
gold-to-silver ratio may even get down to 10 to 1. I believe that the
price of silver has been suppressed.

Do you like base metal stocks because of China’s growing demand?

I wouldn’t be a buyer today. If interest rates go up in Europe and you
have these policies of contraction, how much can China bear? I don't
believe in the growth of the developed countries, and China needs the
developed countries to buy goods.

Sprott Canadian Equity, your mutual fund, has an impressive
20-per-cent annualized return over the same 10 years as your hedge fund.
Why is that?

It was hard for me to imagine that it was possible. As it turned out, I
was wrong. You can prosper in a bear market in a long-only fund. It has
done very well because we just decided to keep pushing into precious
metals … Whatever I own in my long-only fund is exactly the longs that I
own in the same proportion as my hedge fund. It’s only the shorts that
are different. [The shorts] are all in U.S. stocks with a focus on
financials, including major U.S. banks and brokers, consumer
discretionary and housing.

How much of your wealth outside of Sprott Inc. shares are in bullion and precious metals stocks?

I only own funds and gold and silver. I am probably 90 per cent in precious metals personally. And I don’t lose sleep over it.

This interview has been edited and condensed.

Sprott Favourites

Sprott Hedge LP does not reveal its positions monthly, but it holds the
same long-only stocks as Sprott Canadian Equity, also managed by Eric
Sprott. Here were the top 10 holdings in the mutual fund at Oct. 31.

Silver bullion

Gold bullion

Cash and short-term investments

Gold Wheaton Gold Corp.

Yukon-Nevada Gold Corp.

East Asia Minerals Corp.

Corridor Resources Inc.

Sterling Resources Ltd.

CGA Mining Ltd.

Timmins Gold Corp.

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gwar5's picture

Sprott has the anti-paper/anti-GLD ETFs for PMs.


Kali's picture

Too funny.  Hope it works!

Hook Line and Sphincter's picture

"Fck those smartass's over at ZeroHedge."

Hitler is seething and truly going off the deep end this time. Love it!



johngaltfla's picture

Congrats to Tyler for ZH getting prominence in the video. That is some funnnnnnny stuff right thar!

bankonzhongguo's picture



I'm sending this everyone, including my 15 year old Eagle Scout nephew.


These motherfuckers need to be burned at the stake.

A_MacLaren's picture

Definitely one of the best of the Bunker Series.

Mr Lennon Hendrix's picture

Silver caught gold's move this fall; it is up 600% since the fall of '08.  It is monie.  You want monie, you better own silver.  Oh yeah, and you do it and you won't just end up with something in your pocket, you may very well help take down the biggest bankster of all time, the John Pierpont Mourgue.  Rest in peace, snitchez!


by Mr Lennon Hendrix 
on Sun, 12/05/2010 - 21:39


Gold to test resistence at $1420 on Monday, it will test support on Tuesday at $1401 and stay there on Wednesday.  Thursday, it should move back to $1420 and then breakout on Friday to $1440.  This not considering any swans.

Silver should continue its move higher, with less of a downside risk when compared to gold.  Silver is also primed to break out to $36 this month.  There will be a major move in silver during the next three weeks.  It should take gold, platinum, and oil with it, and at the same time, crush the dollar.  The next three weeks could be the biggest month of the year for gold.

ReeferMac's picture

/SI Hit $30/oz and bounced right off... Trying again, and again, and....


Bullion Bitchez!

TheMonetaryRed's picture

Buy, Buy, Buy, you wise survivors of the imagined age.

Gold to $1700

Silver to $50

Meanwhile, back at the ranch........

midtowng's picture

That sounds like a safe prediction. But what then?

chinaguy's picture

Gold has traded at a ratio of 16-to-1 to silver in terms of price, but today it trades in the range of 50 to 1.

Agreed, which is why I over weighted silver to gold 2 -1 when I made my PM purchases three years ago.

butthead's picture

The real fun will begin when silver breaks $50.  Then the sheeple will really start to buy.  They didn't want it at $5 or $10 or $20, etc...but they will rush in as it breaks the 1980 high.

Arius's picture

thats people for you...but with all the misinformation, so, carefully managed out there cant really blame the regular joe (mutual fund manager not the six pack one)...

living on the edge's picture

The masses always come in late but will arrive nevertheless. Our gov has succeeded in keeping the masses at bay till now. I see the storm rising on the horizon. I have waited 25 years to see this day (started buying PM's). With mixed emotions I sit in anticipation of the inevitable.

TheMonetaryRed's picture

Sprott - what a ganef.

Cdad's picture

I understand why you might reference E. Sprott on the matter, however, the guy is a giant ass.  I was on his PHYS when he more than doubled the size of his physical gold fund [double the IPO proceeds] through secondary offerings sold at sweetheart prices to his Wall Street buddies...two secondaries with over allotments before the fund was even a year old.   

As far as I am concerned, Sprott is part of the syndicate to which I often refer.  Good luck with your physical metal crush on him.

SwingForce's picture

2nd Derivative Dreaming.....

quasimodo's picture

You still can't eat it

But can sure as hell eat WITH it


dryam's picture

Sprot on.  Silver just hit $30.

unky's picture

holy shit yes, cant stupid JP M not manipulate a little downward please, i still need to buy some more

oddjob's picture

Sprott is the largest shareholder in Alexco Resources.

Bring the Gold's picture

Been holding AXU for awhile now. A great stock. He also holds a lot of Arian Silver. I originally got in between $0.09 and $0.12 it's around $0.60 as I write this. He also likes Avion gold miner.

rubearish10's picture

Short squeeze in PM's not nearly upon us. If you've witnessed the late 70's you would know this. Many amateurs afoot.

spartan117's picture

OK, I'll bite.

I was too young during the late 70s to invest in anything but lollipops and G.I. Joes.  Care to elaborate on when you believe the squeeze will occur?

rubearish10's picture

Wish I knew when however, the Silver market (gold not as much) is an extremely tight community of players. Let's assume the JP Morgan/HSBC manipulation theme plays out further. Well, anyone, of these "players" or group of players (outside of them) would and do have the ability to "corner" the product. Given the global economic theme, a "squeeze play" against the manipulators should develop rather soon. When it does, you'll see volatility and price extremes not seen since the 70's and culminating in 1980. I'd play that bet all day play with enough dry powder to trade through it or else greed will beat you.

Alex Lionson's picture

According to Silver just took $30, but was repelled (for a while I think)

Silverhog's picture

eBay Silver averaging $33 an oz plus shipping. Better know brands going up to $40+ no shortage of buyers.

Fearless Rick's picture

I've been able to buy on ebay at spot INCLUDING shipping, but only on small amounts.

It's true, though, buying pressure is huge.

rubearish10's picture

Will we ever experience the wake-up call the equity market needs to lean over, roll over and die? Somewhere between 40:1 and 16:1, right??

SilverIsKing's picture

$30 looks expensive...just like $20 looked expensive a few months ago.

In a couple of months, $30 won't look so expensive.

MsCreant's picture


samsara's picture

I just have to mention Ms, that your assessment of RobotTrader the other day was one of the best I have seen.  A perfect observation on where he is at.

Sorry to interrupt your celebration.

(p.s.  I got in at $7 and $400 respectively.  GREAT to watch this unfold,  So long in coming,  Soooo long in coming... )


velobabe's picture

silver jewlry, bitchez†

MsCreant's picture

Silver Belles

(silver belles)

Silver Belles

(silver belles)

It's Christmas time, in get Jacked City.

See the Stings

(see their stings)

Those ding-a-lings


Soon it will be, Indictment Day.

Dr. Sandi's picture

Thanks. Yes, I really did LOL over that.

MsCreant's picture

I know you have gold and are gold, but are you too a silver belle?

JonNadler's picture

Oh please don't buy anymore silver, please, Jamie took away my Ritz Carlton pass and says I have to use 3 star hotels now! I may have to be next to a truck driver. This is not what we're used to. Blythe will have share a room with a truck driver soon, you can let this happen to people like us! We are the masters of the univ.....well we used to be.

Does anybody have employment opportunities for a couple of shill have beens? Blythe and I are available

Gold will be confiscated!..... oh what's the use

MsCreant's picture

Keep your bra on or there will be trouble.

Mongo's picture

If gold takes on $10,000 and gold/silver ratio hits 10:1... the that means it's paaaardey time!


Silver @ 30 bucks is still cheap. Dirt cheap!

dehdhed's picture

yup, buy 10 oz bars of silver and trade later for 1 oz gold.  it's like buying gold for 300 bucks an oz today.  

just keep stacking

Prejudice in Fancy Dress's picture

using past performance as evidence of why to buy something is how you get caught up in a bubble... if you're a long term investor and not trying to get rich quick then don't buy gold/silver... look at the dow/gold ratio

Client 9's picture

To narrow that ratio gold will shortly tank and silver not far behind.  You zombies are such suckers!



So why could Gold be a Bubble?1) Rapid price run-up. Prices never run up forever; they always come back to stable levels. Gold prices are up almost 500 percent since 2000 and almost 1300 percent since the mid-70s. At some point they have to come back down. When that will happen is still in question, but they will stabilize at some point. And stabilization may involve a quick plunge in prices.2) “We Buy Gold” everywhere! In the past two years, there have been more “sell your gold” commercials and “we buy gold” stores than ever before. It seems as if everywhere I go or look I see some kind of reference to gold. The prevalence of these stores and commercials not only points to market saturation, but also points to the massive spotlight that has been shining on Gold.3) EXTREME speculation. A bubble requires investors to be so absolutely certain that prices will continue to rise that they actually neglect to protect themselves from the risks involved. By asking “How high is Gold heading?” instead of “Why is Gold going up?” or “Can Gold go higher?” we’re actually ignoring the downside involved, which can lead to severe panic if Gold actually does start to drop. Here is why extreme speculation is here and very dangerous: a. Common investors can now buy gold. With the introduction of the Gold ETF (GLD), any person who wants to buy gold can easily do so by simply buying the GLD. Before 2004 the only way to buy gold was to buy the actual thing. If gold is available to everyone, and becomes the hot new commodity, a bubble is definitely possible. b. No hedging by the mining companies. In order to protect their businesses from a sudden decline in Gold prices, mining companies have generally hedged themselves by owning some put options or other forms of derivatives that would limit their losses in case of such declines. And the higher the price of gold, the more dangerous the price decline is for the miners. But because most of the miners think that gold prices are going to continue rising, they have recently stopped hedging themselves. At a time when protection is actually the most important in the history of their businesses, they’ve joined the gold craze and ceased to hedge. This has to be one of the most counter-intuitive moves I’ve ever seen. Hedges are protections “just in case” prices go down; miners seem to have forgetten that “just in case” is a small bet compared to the potential devastation they may be setting themselves up for. 4) Gold isn’t enough! With Gold prices soaring, investors have looked for new ways to take advantage of the run-up. Not only have investors run the price of gold (GLD) to high levels, but they have found ways to leverage their positions and even increase speculation in related metals. First, Gold itself was enough (GLD). Then, when investors wanted increased returns if gold went up, they bet on the gold miners through the Gold Miners' GDX ETF; the GDX moves in correlation to GLD, but with a higher beta (in essence, if GLD goes up GDX should move proportionally higher). Now it seems even the regular miners aren’t enough! Investors are now going even further downstream, betting on the junior miners (GDXJ). The junior miners are not only a third derivative bet (Gold-Gold miners-junior miners), but they also signal the extreme belief investors have that prices will continue higher.And if a third-derivative play in Gold wasn’t enough, investors have speculated in the entire precious metals sector. Since Gold is going higher, they say, so should the prices of related metals. And to satisfy investors’ insatiable demand for these metals, the “Glitter” ETF (GLTR), composed of gold, silver, platinum, and palladium investments, was introduced on October 22nd.And if metals weren’t enough, investors have also chased “Rare-Earth” resources through companies such as Rare-Earth-Elements (REE) and Molycorp (MCP). Not only did Molycorp CEO, Mark Smiths, recently “mistakenly” call the Rare-Earth craze a “BUBBLE” (“I don’t think short-term prices in rare earth (minerals) are prices people ought to be counting on…they are really spiked right now and there may be a bubble occurring because of all of the news and the frenzy.”), but the fact that REE and MCP are up about 500 percent and 300 percent respectively since the summer should be enough of a warning. 5) Gold Vending Machines. It wasn’t enough for Gold to be bought at jewelry stores or through distributors directly. They have now built vending machines from which to buy Gold! A German company, Gold-To-Go, has began setting up vending machines around the world in order to attract the average investor. Buying Gold coins and bars from a vending machine? I hear “BUBBLE”!6) Inflation or Deflation? Gold prices have increased due to fears over currency and economic growth. But buyers of Gold have bought Gold both due to fears of deflation and due to the potential for inflation. In other words, some bought Gold because they expect deflation and some bought it because they expect inflation – but one of the two is wrong! We can’t have both deflation and inflation; therefore, a considerable number of investors are wrong and have pushed the price of Gold up farther than is warranted.7) Front Page of the Wall Street Journal. When a story makes the front page of a widely-circulated newspaper or magazine, it signals widespread recognition of that story or theme. Since heavily-distributed newspapers and magazines tend to reflect the widespread sentiment of its readers and the general population, a front-page headline signals the acceptance of that idea as consensus.It’s been a fairly long-standing negative omen for the market when major cover stories marvel at the wondrous bull-market run-ups and, inversely, a positive omen for the market when cover stories mourn the death of markets. That said, positive cover stories regarding investment themes are bad omens, signaling an upcoming pause or correction, if not an end to that theme.Gold made just such an appearance on September 29, 2010 on the front page of the Wall Street Journal, in an article titled “Gold Vaults to New High.” If a front page spot is a signal of widespread acceptance and a warning of an upcoming correction, the Gold Bubble is alive, but probably not so well.