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« Save, Invest, Speculate, Trade or Gamble? | Main | Endeavour Silver Expands Its Silver/Gold Resources for 7th Consecutive Year »

Silver will keep outshining gold: Sprott

gold and silver coins.JPG

Although we are both gold and silver bugs we have posted a number of articles since the inception of this site along the lines of silver outperforming gold, so it is a pleasure to bring you this piece by Eric Sprott.

(Reuters) - Silver is likely to keep outperforming gold thanks to strong dollar flows, though both are still good investments compared with copper and other base metals, according to Eric Sprott, the hedge-fund manager and Canadian investment guru.

"I watch where the money goes and the money's going into silver. There's as much money going into silver as into gold in dollar terms," said Sprott in an interview with Reuters.

Sprott, who heads Toronto-based hedge-fund Sprott Asset Management, said it is important to note that silver available to buy is relatively scarce in terms of value, and that bodes well for further gains.

"There is 75 times more dollars worth of gold to buy than silver, but the money's going in one to one," says Sprott, while speaking on the sidelines of an investor event held in conjunction with the annual PDAC mining convention in Toronto.

Silver stocks in COMEX warehouses are near their lowest since April 2006, when the metal traded at $5 an ounce. Demand for silver coins has also picked up, especially in the United States, where it was at record levels early this year.

"My biggest thing is silver -- I think silver is going to go up a lot here. Gold's right in there, but not as good as silver," said Sprott, following a presentation to hundreds of investors in a resplendent ballroom at Toronto's Royal York Hotel.

Gold and silver -- traditionally viewed as a safe store of value in turbulent times -- have soared on inflation concerns, political turmoil in the Middle East and North Africa, an uneven U.S. economic recovery and the European sovereign debt crisis.

Gold touched an all-time high of $1,444.40 on Monday, while silver hit a 31-year high of $36.70 an ounce, after rating agency Moody's downgraded Greece's debt and violence flared anew in Libya.

"I have a little website that sells gold and silver maple leafs, and we sell about four times more silver than gold in dollars (terms)," said Sprott, who had earlier in the day addressed a room full of miners and investors and others at the PDAC convention.

The PDAC event is the world's largest gathering of people tied to the mining industry, and this year's event is expected to attract more than 22,000. The mood among delegates is exuberant, thanks to record or near-record prices that both precious and base metals are commanding.


While bullish on precious metals, Sprott is wary of base metals - copper, nickel and zinc - as their fortunes are too closely tied to the fate of the broader economy.

"I agree with the prices of precious metals. I'm not as much of a bull on base metals," said Sprott. "I still worry about the financial system, it's massively over-levered and will still come undone."

Sprott's views on base metals mirror those of another of Canada's most influential money managers, Donald Coxe, who expresses similar doubts about the strength of the economy due to surging food and fuel prices.

"I'm not as economically optimistic as the average guy, so I don't go to base metals," said Sprott, a gold bug, who has built a reputation for bucking market trends.

"We have oil and food prices rising like crazy ... It's almost hyper-inflationary," said Sprott, who advises investors to put money in "real things" where demand is virtually inelastic.

"I'm very optimistic about gold and silver," said Sprott. "And real things like potash, uranium, oil, stuff that is absolutely essential."

So there you have it from the man himself.

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We now have 65 winners out of 67 options trades, or a 97.00% success rate If you have any questions regarding these trades please address them through their site where they will be handled quickly and I hope efficiently.

sk chart 19 Feb 2011.JPG

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Stay on your toes and have a good one.

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Reader Comments (14)

Did you guys see the price of silver since August it has really out performed gold. If you really want to take a position I would do it through gold.

Silver to gold is almost at record high.

March 9, 2011 | Unregistered CommenterIntrinsic Value

Hold onto the silver for about two more years and you will be glad you did. We will see one thousand an ounce or more........

March 10, 2011 | Unregistered CommenterDebora Edholm

One thousand? Ha ha ha!
Its time for bears now.
Silver is going to 22.
In five more years you will see it at 4.50, not 1000.
I am glad I am short.

March 10, 2011 | Unregistered CommenterDi

I am talking about forty two within months. The pull back today proves it. I am eighty thousand in the money on my option so how about you? I am holding eight hundred and twenty ounces for the next two to two and a half years. Plenty of people feel the same as I do.....

Forty three down to twenty six and then inch back up to thirty or forty. After that eighty six.

It could take three years to reach my mark but I am patient.

March 10, 2011 | Unregistered CommenterDebora Edholm

Hey Di, why at 4.50? Are you expecting deflation after hyperinflation with all the action on the sell side? Right now I am on the fence waiting for the precious metals correction, which may be under way now, and then I will jump in for the ride up.

March 10, 2011 | Unregistered CommenterJohn Ell

Man, I'm glad other people know where the silver price is going with such precision. I have no such powers.

How about UP...a lot...before too long. That's about the best I can do. Hey Di, what happened to the $2.50 call?

I'm thinking hundreds and eventually a nearly infinite terms of the amazing vanishing clownbuck. Try to cover THAT short.

By the way, this is the second time I've seen the comment that the "silver to gold" ratio (usually expressed as the gold:silver ratio) is "almost at a record high."

Huh? Not so Chucko. Not even remotely close. How far back are you going? Look at 1980 and 83. And if memory serves, the mid 80's saw a marginally lower ratio. Historically, G/S traded down to 5. Long time at 16 by fiat, but there were long stretches when the single digits prevailed without the heavy hand of the state involved. But hey, believe anything you want.

We gotta have shorts if we're gonna chase the shorts and enjoy some real fireworks. Enjoy the company of JP Morgan.

March 10, 2011 | Unregistered Commenterfallingman

Silver will go to forty two. Sell and buy back in at twenty six and then ride it up. A short makes sense after forty two. In the long term silver will outshine gold as it has done this year. I do know the price of silver. Google me and see what I said about silver and gold. Said it years ago and called it all the way. You could short it now but it is risky. I would wait.............The pull back today shows it is a time to watch and see. I expected it and that tells me I am right on. Now also if you really want a good trade buy a rough rice call option soon for a strike price of seventeen cents or one cent above the current price. Jan 2012 rough rice for two thousand and within six to nine months top you will make eight thousand five hundred dollars. That is 7 cents profit equals the eight thousand five hundred. Selling it at twenty four. It will top out at 32 so I will probably buy back in after I cash out at twenty four. Check out the chart. I have been at this for over eleven years and I love it. Retired to Costa Rica at age forty one. Although not really retired if you consider trading and raising an eleven year old. I do this for my son. Oh and how do I know silver so well? God only knows. Not sure just do................Lady luck they call me.....

March 10, 2011 | Unregistered CommenterDebora Edholm

Di, do you own Fruit Of The Loom stock? I hear they're offering a new product line, flavored shorts. Starting with Vanilla, chocolate, and strawberry. Di, let's hear some details about your wisdom of shorting a raging silver market? Delusions and all, let's hear it.
I'm embarassed the gains I'm making in my niche PM market, how about you?
Snakes-the real kind-have been very good to me.

March 10, 2011 | Unregistered Commentersnakeman

I have done well with my option as I said. Other than that I have 820 ounces that I know will be valued over a thousand in a few years. My plan is to sell at forty three because the charts tell me there will be a fall back to twenty six. At that point I am buying back in and looking for a high of eighty six. If one has the real metal and can hold on no big deal yes it will go back up. For me my idea is to sell so I can buy more later on my option. I love the rough rice option. I really do. No I own no stocks nor would I. I am a commodity gal all the way. I am thrilled with my results this year and so are my clients. I just had three buy rough rice. I work off a percentage of the profits so I do not take risky trades. When silver gets close to forty study the chart. Watch it. In the mean time trade something else and like I said get in at twenty six. Markets never move in straight lines and never will. Or better yet ask Warren why he is selling at about the same price as I am. I am from Omaha and used to sit next to him in my college days at a soda. I learned a lot and he used to give me the Journal when I could not afford it. I did turn my friends on to Berkshire back then and my family. I study all the time and love trading. I know it makes no sense to the average bear but neither did buying Berkshire at five grand a share back then. I had to tell them about the smart guy I met and how I knew I was on to something. Needless to say the same people that bought Berkshire are buying rice this week and bought silver years ago with me. Now you know part of my story. I am a very proud trader and I have worked my tush off ever since I was a kid. I grew up on a farm and it taught me a lot. I farm here too. I believe I am correct so time will tell. Then we can talk again. Right now I have to walk my dog...............I gave you a free trade because you made me laugh. That is a nice trade I gave you so go take a look at it.

March 10, 2011 | Unregistered CommenterDebora Edholm

Oh and I forgot to say I love snakes so that is the other reason I gave you the free trade. We have all the cool ones here. I love the eyelash viper.

March 10, 2011 | Unregistered CommenterDebora Edholm

Ahh, must live in Costa Rica or thereabouts with Eyelash Vipers lurking. However, I was actually referring to "Di"'s commments, our resident shorter. He/she almost always informs us of his/her shorts, when silver's's comical...I mean, silver at US$4.50?? Maybe in fatasyland. Neva gunna happen, the world simply won't allow it. Not without some Iranian armagedon, and even that would be major bullish PM's...
You Debora sound like a smart cookie.
Drive on, Snakeman!

March 10, 2011 | Unregistered Commentersnakeman

Thanks fellow snake lover. I am sitting on the sidelines watching carefully. I know we will never see it that cheap ever again. This person is not doing their homework. I am just wondering about the forty dollar point. Let me know what your doing. It could take even four years to reach the thousand range but maybe sooner. I know it will just like I knew Buffet was a smart cookie, a very poor dresser but something told me I should listen to him. I am watching to see what he does and if he gets out at forty two. That is the word. It is supposed to fall back only to twenty six but that seems odd really. We are living in odd times for sure. Yep I am in the Costa Rican jungle of Osa. I have visitors all the time. I always release them down by the river. I have been lucky so far with no bites. A girlfriend of mine not so lucky. Bit by a fer de lance and lived to tell the story. Did you look at the rough rice? I like this trade. I was glad for the fall back today because it not it would of gone parabolic and that would not have good since it would of had to do a big retrace. Feelings on this por favor? Hey would you mail me the chocolate panties for gals. Sounds fun................Just

March 10, 2011 | Unregistered CommenterDebora Edholm

I dated one once!

March 10, 2011 | Unregistered CommenterSilver Prices

Silver certainly will make a correction, I guess till 32 min.

March 12, 2011 | Unregistered Commentermurat gunes

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