It has been a difficult year for silver investors with the metal falling by 36% year-to-date. While the Federal Reserve balance sheet continues to expand, ‘taper’ discussions by the Federal Open Market Committee have weighed heavily on the price performance of all the precious metals this year. By our calculations, over the last five years silver has a beta to the gold price of 1.5. This implies that price changes in gold are magnified in silver. Combine this with an 80% correlation in the price action between gold and silver over the same time frame and it’s easy to see that where the price of gold goes, the price of silver goes faster. As we break down the fundamentals for silver, market developments this year give rise to a curious conundrum – how can the case for silver be stronger while the price continues to languish? We begin with investor sentiment. [Read more...]
Eric Sprott on his personal portfolio:
Between shares in mining companies and physical bullion, I have at least 80% of my total portfolio invested in gold and silver. This is similar to the amount in the public accounts I run such as the mutual funds. I have been happy to remain there. It was a wonderful trade since 2000, and, of course, an awful trade since the 2011 peak.
Breaking it down further, the amount of bullion that I hold has been going down – to probably 15 percent of my total portfolio right now. It was as high as 35 or 40 percent.
This year, I am selling bullion to buy stocks because the leverage is so much higher in the equities than in the physical bullion. We decided to move into stocks, and we have participated in a number of private placements in the past 3 or 4 months in companies that are highly leveraged to the price of the metals going up.
I am putting my money down on the price of gold going up, and seeing a quantum increase in the precious metals equities.
On the fate of the US dollar:
It will be weak. The US dollar will eventually become valueless, as all paper currencies eventually become.
But it is tough to say when people will turn their backs on the dollar. The best things that ever happened to the US dollar were the Yen, the Euro, and the Pound. They are all basket cases. I am not confident at all with regards to the value of these currencies.
Eric Sprott answers 17 more tough questions on gold & silver below: [Read more...]
Demand for gold bars, coins and jewelry increased to multi-year highs in the first half of 2013, but was offset by outflows from exchange-traded funds, according to the World Gold Council, which produces a quarterly Gold Demand Trends Report and recently released the first-ever Direct Economic Impact of Gold Report. Sprott Securities founder Eric Sprott questioned those statistics in a call-out on his website. He figures that the demand for gold is actually 3,000 tons more than the annual supply, and therefore the gold price will soon be much higher. What is the true demand for gold? How much is really available in any given year? Does supply and demand really determine the price of gold anymore? The Gold Report called Sprott and John Gravelle, global and Canadian mining leader for PwC, which produced the report for the World Gold Council, to find out. [Read more...]
In this interview with Peter Spina, Eric Sprott discusses the unprecedented silver consumption by India for investment purposes as the Indian gov’t cracks down on gold imports, and how India’s 4,000 ton increase in silver demand this year alone is likely to affect the silver market going forward.
Eric views the current price action in silver as extremely counter-intuitive considering the physical supply and demand fundamentals, and states that to see the price of silver go down in this environment (as India consumes an ADDITIONAL 30% of global investment silver supply) just blows me away!
Sprott concludes: These trends simply can’t continue. You can’t have India suddenly consuming 15% of the global market, people in the US buying an all-time record amount of silver, and put the same amount of money into silver as gold, those things cannot continue to happen and the price of silver stay down.
Eric Sprott’s full MUST LISTEN interview on silver is below: [Read more...]
While demand for physical gold remains extremely strong, prices on the COMEX have fallen precipitously. This contradictory situation is the single most important obstacle to a healthy gold mining industry.
In my opinion, the massive imbalance between supply and demand is not reflected in prices because available statistics are misleading. It is not the first time that GFMS (and World Gold Council) statistics come under pressure from the investment community. In his now celebrated “The 1998 Gold Book Annual”, Frank Veneroso demonstrated the inconsistencies in GFMS gold demand data and proceeded to show how they grossly underestimated demand. The tremendous increase in the price of gold over the following years vindicated his conclusions.
I urge the leaders of the World Gold Council, for the benefit of their own members, to improve the quality of their data and find alternative sources than the GFMS, which paints a misleading picture of the real demand for gold. This lack of quality information has certainly been one of the driving factors behind the lack of investors’ confidence towards gold as an investment. Gold has been one of the best performing asset classes since 2000, and the World Gold Council should be promoting it accordingly. [Read more...]
Rick Rule: “Eric Sprott…is as aggressive as I have seen him since the year 2000…he is as is his style, the style that has made him a billionaire, very aggressively going into the marginal junior producers…companies that barely make money at $1400, but would be making $800 or $900 an ounce if the gold price went higher….
Eric believes that gold within 12 months will certainly be above $2000…[and] that this is the year where his portfolio will see ten to fifteen–10 to 20 baggers.” [Read more...]
What happens when you bring together four of the top minds in the precious metals investing space to share insights from the front lines of gold, silver platinum and palladium investing?
These excerpts from a Sprott Resources Roundtable featuring Gloom, Boom and Doom Report Publisher Marc Faber, Sprott Asset Management Chief Investment Strategist John Embry, Sprott Global Resource Investments Founder Rick Rule and Sprott Asset Management Founder Eric Sprott prove that great minds think big. [Read more...]
In his most explosive interview with SD ever, CEO of Sprott Asset Management Eric Sprott discussed his thoughts on the Fed’s no-taper, why he believes the cartel took down gold this spring, the evidence that a bail-in is coming to the US and Canada, and the US fiscal debt crisis.
Sprott stated the Fed could not taper QE because it has lost control of the bond market!
“We have never printed on a daily basis more than we are printing right now, and all the while, interest rates doubled! Just the talk of tapering moved the rates significantly higher. I happen to believe that they have lost control of the bond market. Just by talking the talk the rates doubled and if they walked the walk, I think we would see a dramatic increase in rates here and severe carnage in the bond market. ”
Sprott went on to claim that the paper gold market was crushed by the Western Central banks this spring in order to free up gold supply from the ETFs as a massive gold shortage threatened the banking system, and that this is a battle the Western Central banks are doomed to lose as global physical demand will soon overwhelm Central bank supply.
Eric Sprott’s EXPLOSIVE INTERVIEW with The Doc covering tapering, the motive behind the PM take-down, and much more is below:
Is Eric Sprott selling out of his massive silver positions, exiting the market he’s long evangelized?
Casey Research’s Marin Katusa sat down with Eric Sprott, chairman of the eponymous Sprott Inc. group of companies, to directly ask him some of the tough questions the blogs have been buzzing about.
Eric Sprott’s full interview with Marin Katusa on whether he’s selling his silver positions, possible successors to the Sprott Empire, and Sprott’s outlook for the metals and the economy is below: [Read more...]
This week’s meeting of the Federal Open Market Committee (FOMC) had traders, market commentators and investors almost in a frenzy as they tried to predict the outcome. This was the meeting where economists expected the Fed to announce the ‘tapering’ of its monthly purchases of $85 billion of Treasury securities and mortgage-backed bonds. According to a Bloomberg News survey of 34 economists last week, they expected the Federal Reserve to taper its monthly bond buying by $10 billion, to $75 billion.1 But they were wrong.
While much ink has been spilled about ‘tapering’ of assets purchases, it now seems that this extended discussion of reducing monetary accommodation was nothing more than a ‘taper in a teapot’.
In this MUST WATCH interview, Sprott Asset Management’s Eric Sprott states that the Fed’s taper talk was smoke and mirrors intended to hammer the price of gold from day one, and that gold is ready to live its own life based on fundamentals!
Eric Sprott’s full MUST WATCH thoughts on taper, gold and silver shortages, bail-ins, and whether the next massive rally in the metals is underway is below: [Read more...]
I had the opportunity this week to connect with Eric Sprott, Chief Executive Officer and Senior Portfolio Manager of Sprott Asset Management.
It was a powerful conversation as Eric spoke to the “gargantuan rise” he sees coming for precious metals and their corresponding equities, one which he expects will take gold to new highs within the next twelve months. Eric also spoke to the incredibly fragile Western financial system, and pointed out the one event which when it occurs—will completely take the lid off of gold! [Read more...]
Economist and Boston University Professor Laurence Kotlikoff calculates that to fully eliminate the shortfall in Social Security funding, the government would need to either cut all present and future social security benefits by 22%, or increase the Federal Insurance Contributions Act tax (FICA) by 32% (from 12.4% to 16.4%). But this is just to fix Social Security!
For the U.S. Federal Government as a whole, Kotlikoff estimates the fiscal gap to be around $222 trillion! This is many orders of magnitude larger than GDP. In order to wipe out this gap, the Federal Government would need to permanently increase all taxes by 64% or reduce all expenditures (with the exception of debt servicing) by a whopping 40%.
The problem is clear; every level of government has promised too much and is now faced with the politically unappealing prospect of either drastically increasing taxes for the working age population or significantly reducing benefits for the retired (or future retired). As evidenced by the Detroit bankruptcy, the longer we wait, the worse it will get. The greater the delay, the more pain and suffering citizens will face when the benefits and safety nets they have come to expect from the government suddenly disappear.
Given that the Federal government would need to cut all expenses by 40% to balance the books (according to Kotlikoff), it is not hard to imagine that Social Security, Medicare and Medicaid would suffer haircuts in excess of those experienced by the Detroit pensioners.
Over time, politicians from all stripes have proven adept at cognitive dissonance, but these increases in taxes and cuts to benefits will have to happen, one way or another; it is just a matter of time. [Read more...]
As we have shown in Part 1 & Part 2, the past decade has seen a large discrepancy between the available gold supply and sales. The conclusion we have reached is that this gold has been supplied by Central Banks, who have replaced their holdings of physical gold with claims on gold (paper gold).
Many recent events suggest that the Central Banks are getting close to the end of their supplies and that the physical market for gold is becoming increasingly tight.
This (price smash) was all orchestrated to increase supply and tame demand. We believe that central planners are now running out of options to suppress the gold price. After taking a pause, the secular gold bull market is set to continue. [Read more...]