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The Sprotts Expect Silver to Keep on Sizzling

The Sprotts Expect Silver to Keep on Sizzling

Author: Karen Roche & Sally Lowder (The Gold Report)
Posted: March 11, 2011

Sprott Money executives Eric Sprott (chairman) and Larisa Sprott (president), sing the praises of the "poor man's gold" in this exclusive interview with The Gold Report. "All the data supports the thesis that silver is undervalued," says Eric—who serves as chairman of Sprott Inc., as well as CEO, CIO and senior portfolio manager of Sprott Asset Management LP. "We'll certainly see a three-digit price," he adds. Larisa explains how the company's business model differs from others in the space and reveals plans to open Sprott Money USA within the year.

The Gold Report: Your Markets at a Glance commentary last November said it seemed unlikely that silver would stay under $30 for long. Four months later, the spot price is about $35. Are you surprised by how quickly your prediction came true?

Eric Sprott: Not really. Based on fundamental evidence, technical evidence and other things going on in the markets, I thought silver would be explosive this year. I've probably fallen a little short of my targets, but I think it's going higher. Silver doesn't have to hit $50 for everyone who's involved with it to make outsized returns, but I thought it could reach $50 within the first half of this year. All the data supports the thesis that silver is undervalued.

TGR: Are you seeing $50 as a top price, or a new baseline?

ES: Lots of things may happen in the short term that have no bearing on the long term. Silver now trades at a price ratio of about 40:1 to gold. In other words, it takes 40 ounces of silver price to equal one ounce of gold. The historical ratio is more like 16:1. My view is that we will go back to 16:1 within two to five years. To put that in perspective, a $1,600 gold price would imply $100 for silver. I happen to believe that gold will go much higher than $1,600; therefore, given time and letting this ratio play out, I think we'll certainly see a three-digit price for silver.

TGR: So, $50 may even become the floor.

ES: It's a step on the way. It may come faster or it may take a little longer; but when it happens, silver will outperform gold 3:1. That's a shockingly large difference and good reason to get a little more involved in silver.

TGR: You've said that silver will be this decade's gold.

ES: We assembled the gold articles we wrote over the last decade into a compendium called Gold the Investment of the Decade and these are also archived and available on our website. Now that we're in the second year of another decade, I'd say silver will be the investment of this decade. Gold essentially blew everything away in the last decade. There was no contest whatsoever with any currency or stock market. I think we'll all look back 10 years from now and say silver was the investment of this decade, because it might triple the performance of gold—and I think gold will continue to outperform all other currencies and stock markets. So I think silver's really an area where people should focus very heavily.

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