The Finance News Network recently interviewed commodity hedge
fund guru Eric Sprott:
Hello, I'm Lelde Smits for Australia's Finance News Network and
joining me in Hong Kong is Eric Sprott, Chairman of
Canadian-based asset manager, Sprott Inc. Eric, welcome back to
the show and great to speak with you here at Mines & Money.
We all know you're a big fan of precious metals. What do you
believe are the biggest macro factors that will drive up their
prices over the next five years?
Well it's sort of the same factors that have been operative for a
long time; one is that I think there's a physical shortage of
gold that's been supplied by the western central banks
surreptitiously. We now have the tail winds of printing of money,
we have the further tail wind of bank runs; and we may get one
now as we see what's going on in Europe that we might experience
another bank run. So those are the kind of key things that I
watch right now.
So which of these global threats that you mention are most
concerning to you?
Well, the biggest threat is we have way too much debt versus the
productive engine that has to take care of the debt. And we seem
to believe that you solve debt problem by issuing more debt; you
know we're going to solve the Cyprus problem by giving them $17
billion in more debt- it's not going to solve any problem at all.
The productive engine is not capable of servicing the debt.
Let's get to your outlook now for gold and silver. When we last
spoke at the end of 2011 you predicted gold would be north of
) a tonne by mid 2012 and it is yet to break through that
barrier. How have you adjusted your forecasts since?
I have not changed my forecast. In fact I think, where's the
price of gold going to go, it's going to be in the thousands
somewhere - the multi-thousands in my mind. As I say we keep
printing money, we have no economic growth, we have a banking
crisis almost every week somewhere. And sooner or later people
will figure out that gold is something they should own.
But Eric, could you put a timeframe on when we could expect the
price of gold to break through that $2,000 (
Well, you know the gold's gone up, I think it's compounded at 16%
a year for 12 years. I see no reason why it wouldn't continue to
do that, and in fact there are more reasons for it to do it as we
now have all developed countries printing money.
You know when you see Japan coming in saying, "We're going to
cause inflation," you could never imagined when we started in
this gold business that we'd have those sort of tail winds behind
us but that's what people are doing so I think it will pick up
the speed of appreciation over time here.
So Eric, how does your outlook for the price of gold compare to
your forecasts for the price of silver?
Well, as you know I happen to believe that this is the decade for
silver, and why do I say that? Because I see what people are
doing with their money in terms of investing in silver, and
silver used to trade at a 16:1 ratio to gold - it trades at a
55:1 ratio to gold, but I see lots of buying in the silver market
vis-a-vis the gold market.
Silver's a very, very small market and I think silver will triple
the performance of gold this decade. And, we're seeing part of it
already, of course we did get up to $50 and then we faded again.
But I think silver will re-assert itself - I'm an optimist for
gold - but I think silver is the place to be.
Turning to investments and, generally speaking, if investors want
to get a piece of the action they have the options of buying
financial products linked to the metals, purchasing mining stocks
or bullion. Eric, how much would you allocate to each asset
I'm a great believer in the physical, that's the first thing, so
I think everybody should have some physical metal. If you're
young and you're into capital appreciation, which I think
probably most of your viewers might be, I think that right here
at these levels I think the stocks are way better value than the
metals. And typically, they've out-performed the metals by at
least 2-3 to 1. So if we're correct in our thesis that selling
gold is going to go higher here, the stocks are going to superbly
out-perform the metals. And you know, if they're risk tolerant I
think that's where they should put their money.
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